industry insight new zealand ports and freight yearbook 2018 · 2019-03-03 · 2 introduction 3...

Industry insightNew Zealand ports and freight yearbook 2018

2

Introduction 3

Glossary 4

Global Perspectives 6

Thought Leadership – Smart Ports 19

Thought Leadership – Port / City Duality 25

Domestic Environment 29

New Zealand Freight Task 31

Port Performance 41

Port Summaries 53

Contents

New Zealand ports and freight yearbook 2018 | Contents

3

Introduction

New Zealand ports and freight yearbook 2018 | Introduction

The Deloitte Ports and Freight Yearbook is a concise snapshot of selected macroeconomic and domestic drivers of New Zealand port and freight activity. As a recent initiative, we welcome your feedback in relation to the content and presentation format, and look forward to future discussion and engagement.

Key updates to this years publication include a contribution from Deloitte’s specialist economic advisory team, Deloitte Access Economics, who provide an overview of both the global economy and the prospects for global trade.

We also include two thought leadership pieces that highlight the challenges and opportunities facing ports in New Zealand and internationally.

The first examines smart ports, the technology that makes them possible and what their future holds. This includes the internet of things, 3D printing and automated port operations.

The second looks at the relationship between ports and cities, how this relationship has changed overtime and provides examples of initiatives to enhance the integration of ports into the wider urban environment occurring elsewhere in the world.

The Yearbook also presents the most recent data on the New Zealand freight task, as well as operational and financial performance of New Zealand’s major ports.

4

Glossary

New Zealand ports and freight yearbook 2018 | Glossary

AKL Ports of Auckland / Auckland

AS-NA Asia to North America Trade Route

AS-ME Asia to Middle East Trade Route

AS-Med Asia to Mediterranean Trade Route

AS-NE Asia to Northern Europe Trade Route

AS-SA Asia to South America Trade Route

AUS-FE Australia to Far East Trade Route

BLU Southport (Bluff)

BOP Bay of Plenty

BRA Brazil

CAGR Compound Annual Growth Rate

CAN Canterbury

CHN China

DEU Germany

EBIT Earnings Before Interest and Tax

EIA Energy Information Administration

EST Eastland Port

FEU Forty-foot Equivalent Unit

FIGS Freight Information Gathering System

FTA Free Trade Agreement

GDP Gross Domestic Product

GFC Global Financial Crisis

GIS Gisborne

GT Gross Tonnes

HKB Hawke’s Bay

IDN Indonesia

IMF International Monetary Fund

IND India

IoT Internet of Things

ISPS International Ship and Port Security

ITS International Trade Statistics

JPN Japan

KOR South Korea

LNG Liquefied Natural Gas

LPG Liquefied Petroleum Gas

LYT Lyttelton Port of Christchurch

MAN Manawatu

MLB Port Marlborough

MMH Marsden Maritime Holdings

MoT Ministry of Transport

MYS Malaysia

NAFTA North American Free Trade Agreement

NA-SA North America to South America Trade Route

NATO North Atlantic Treaty Organisation

NE-NA Northern Europe to North America Trade Route

NE-SA Northern Europe to South America Trade Route

NFDS National Freight Demands Study

NIP National Infrastructure Plan

NPAT Net Profit after Tax

NPE Napier Port

5

Glossary

New Zealand ports and freight yearbook 2018 | Glossary

NPL Port Taranaki

NSN Port Nelson

NTH Northland

NYMEX New York Mercantile Exchange

NZIER New Zealand Institute of Economic Research Inc

NZTA New Zealand Transport Agency

OCR Official Cash Rate

OECD Organisation for Economic Co-operation and Development

OTG Otago

POE Port of Otago

RBNZ Reserve Bank of New Zealand

RCEP Regional Comprehensive Economic Partnership

RMA Resource Management Act

SAU Saudi Arabia

STEO Short Term Energy Outlook

STH Southland

T&L Transport and Logistics

TAR Taranaki

TEU Twenty-foot Equivalent Unit

THA Thailand

TIU PrimePort Timaru

TNM Tasman-Nelson-Marlborough

TPP Trans Pacific Partnership

TRG Port of Tauranga

TWN Taiwan

USA United States of America

VICT Victoria International Container Terminal

VNM Vietnam

WAI Waikato

WLG Centreport / Wellington

WST Westland

WTI West Texas Intermediate

WTO World Trade Organisation

6

Global Perspectives

7

(10)

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15

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%

Real GDP growth (annual change)

Australia China IndiaNew Zealand United States WorldEuro area

Source: IMF world economic outlook

Global perspectives

New Zealand ports and freight yearbook 2018 | Global Perspectives

Global economy1

The global economy is strengthening after a period of subdued growth. The International Monetary Fund’s (IMF) World Economic Outlook (January 2018) estimates global gross domestic product (GDP) growth reached 3.7% in 2017, up from 3.2% in 2016. This is stronger than anticipated, as the cyclical recovery in the Eurozone accelerated and manufacturing activity in Asia increased.

The global outlook remains bright, with growth estimated to accelerate to 3.9% in 2018 and 2019. This is well above the average 3.3% rate achieved in the years following the 2008 Global Financial Crisis (GFC).

Tax cuts in the United States (US) are expected to stimulate investment activity, flowing through to employment and household consumption. This will support broader momentum in growth, with US GDP projected to grow at 2.7% in 2018.

The strength of Asian economies has been an important driver of economic activity, accounting for around 60% of global GDP growth over the past 10 years. This will remain the case in 2018, with China alone contributing nearly 30% towards global growth.

Both Australia and New Zealand are expected to benefit from the pick up in global growth, expanding by 2.9% and 3.0% respectively in 2018.

Despite the broad-based pick up in global growth, price pressures remain subdued. Labour markets have tightened across developed countries, but the flow on to wages and spending activity has been slow. Commodity prices have fallen as supply exceeds demand and further dampens price growth.

The IMF expects inflation to accelerate to 3.3% in 2018 as job growth translates into higher wages and spending. This will be the strongest rate of growth since 2013.

With inflation expected to pick up, the period of accommodative monetary policy is coming to an end. The US Federal Reserve has already commenced the process of monetary normalisation, raising interest rates by 75 basis points in 2017. Markets are expecting a further three rate hikes in 2018.

Monetary normalisation is not just occurring in the US. The Bank of England also raised rates in late 2017, in response to a weaker currency and strong job growth, and the European Central Bank has indicated that it would taper its asset purchase programme.

This solid economic performance in coming years is weighted to the downside in the IMF’s medium term forecasts. The strength of business sentiment and investment activity could be curtailed by faster than expected interest rate hikes. This would also dampen the rally in equity prices and strong price growth across various housing markets, posing a risk to household spending activity.

Politics in the US and Europe also pose a risk to the global outlook. The negotiations around the United Kingdom’s departure from the European Union have made progress over the past year, but there is still much to be decided, including terms around trade and financial access to the single market. A deterioration in negotiations could result in a disorderly exit, disrupting the region’s economic recovery.

The Trump administration managed to pass its tax bill in late 2017, alleviating concerns about its ability to enact policy. However, the administration’s focus on protectionist policies now poses a more immediate risk to the growth outlook. An increase in trade barriers and restrictive regulation could derail the current momentum in global growth.

Fore

cast

1: Economic analysis performed by Deloitte Access Economics

8

Global trade1

Global trade activity exceeded expectations in 2017 after gaining momentum in the back half of 2016 and reversing two years of pronounced weakness. The IMF expects volume trade in goods and services to have expanded by 4.7% in 2017, marking the first time that trade has outpaced output growth since 2014. Emerging markets and developing economies have been a key driver with import and export volumes growing by 5.9%.

The outlook for 2018 remains upbeat, with growth moderating slightly to 4.6%, which remains stronger than global output growth. The World Trade Organisation (WTO) revised their estimate for growth in world merchandise trade volume in 2017 to 3.6%, up from the previous estimate of 2.4%. The improvement was driven by increased import activity in Asia and North America as demand recovered from a weak performance in 2016. The WTO projects that merchandise trade growth will moderate to 3.2% in 2018.

Looking ahead, trade activity is likely to be constrained by rising global interest rates and slower economic activity in China. Structural issues, such as the slower pace of global value chain integration and trade liberalisation, will also limit growth in trade over the medium term.

Trade liberalisation started in earnest after WWII, accelerating in the 1990’s with a proliferation of free trade agreements (FTA). Since 1980, average tariff rates in both advanced and emerging economies have more than halved. Over this period of time, global economic growth also accelerated, benefiting from value chain efficiencies and opening of new markets. More recently, the number of new trade agreements have slowed as their coverage expands. Currently, a record 25% of global GDP is covered by FTAs.

After the US pulled out in January 2017, the Trans-Pacific Partnership (TPP) continues to be negotiated among the 11 remaining countries, including New Zealand. In January, the TPP-11 finalised the terms of a ‘Comprehensive and Progressive Agreement’, which incorporates the majority of the original TPP terms agreed upon in 2015. This agreement is expected to be signed in March.


Global perspectives

The Regional Comprehensive Economic Partnership (RCEP) negotiations were launched in November 2012, with countries included in the proposed free trade area accounting for almost half of the world’s population, almost 30% of global GDP and over a quarter of world exports. Negotiations are still ongoing with bilateral agreements between participating countries a key prerequisite before the RCEP can progress further.

1: Economic analysis performed by Deloitte Access Economics

9

Global perspectives

Container freight trendsChina has dominated the container trade for over a decade, principally as an exporter. The US, in second place, is a net importer.

Since 2000 the proportion of total global freight that is containerised has steadily increased and as of 2016 containerisedgoods make up 15.7% of total freight (billion tonne-miles).

The importance of Asia (especially China) is exemplified in its participation in the top four container trade routes.

The majority of Twenty-foot Equivalent Units (TEU) shipped on the Asia-North America trade route are East bound, heading from Asia to North America, this is consistent with China’s status as the World’s dominant exporter. The West bound trade between Asia and Northern Europe reinforces this notion.


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2002 2004 2006 2008 2010 2012 2014 2016

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Global freight task

Container Other Dry Oil/Gas/Chemicals Container Share (RHS)Source: The Shipbuilders Association of Japan

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AS-NA AS-NE AS-Med AS-ME NE-NA AUS-FE AS-SA NE-SA NA-SA

Mill

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Top trade routes

West Bound East Bound North Bound South BoundSource: Worldshipping

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CHN USA KOR JPN IDN THA DEU TWN IND VNM BRA MYS SAU Other

Mill

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Full container volumes

Exports ImportsSource: Worldshipping

10

Global perspectives

Container shippingThe shipping industry plays a pivotal role within the global economy. Shaped since the 1960’s by the two mega trends of globalisation and containerisation.

The shipping industry is constantly evolving, striving for increased efficiency through innovation with new larger ships, specialised for each trade (especially containers) and adopting emerging technologies to boost efficiency and improve environmental outcomes.

After difficult years in 2015 and 2016, the shipping industry experienced somewhat of a recovery in 2017, with the majority of lines forecast to record an operating profit. Analysts expect this to continue into 2018. According to the IMF’s World Economic Outlook, global economic growth for 2018 is projected to be approximately 4%. This growth has a flow on effect to the shipping industry, with Hapag-Lloyd predicting that global container shipping volume will increase between 4.8% and 5.1% from 2018 to 2021.

Despite the positive economic outlook the shipping industry faces a number of challenges. According to McKinsey, the global container shipping industry is exposed to a number of risks which could result in a material slowdown in container trade.


These risks are further discussed below:

Growth in emerging markets

China’s stunning economic growth over the last three decades was a boon to global shipping. In 2000 China imported and exported 13 million TEU, by 2015 this had quadrupled to 52 million TEU. However, as China begins to moderate it’s forecasts of GDP growth and move towards a services based economy, this rate of growth in container volumes is unlikely to persist. Among emerging economies only India has the potential to have a similar impact on global trade and the reforms necessary for it to do so may happen much more slowly than in China.

11

Global perspectives

Dematerialisation of demand

This is a phenomenon observed in wealthy societies where demand for physical goods is replaced by demand for services.

As China has become wealthier, demand has started to shift towards services. This, coupled with income growth in the developing world slower than that achieved by China in the last 30 years, means the growth rate in trade may lag that previously observed.

McKinsey also cites the miniturisation of products as another factor impacting trade growth. With smaller products or products boasting multiple features that were once the realm of a variety of different goods, fewer containers of goods need to be shipped to meet consumer demand.

Geopolitical risk

In recent years the march towards globalisation has started to stall with nationalist and isolationist sentiment increasing through much of the developed world. This is exemplified by the decision of the US to withdraw from the TPP trade deal and it’s current threat to withdraw from, or renegotiate, the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico.


Changing manufacturing footprints

Digitally enabled technologies (robotics, and 3-D printing) has the potential to alter the regions in which the production of goods occurs.

If labour costs are no longer a key determinant of manufacturing location, due to the automation of the process, then manufacturing may return to countries that had previously outsourced this function to developing countries with lower labour costs.

The above risk is qualified by noting that labour costs were a key driver for only 13% of all TEUs in 2015 and that over half of TEUs were generated by goods where access to raw materials is of more significance.

The impact that the emergence of 3-D printing will have on trade volumes is not yet fully understood. 3-D printing is notable for its efficient use of materials resulting in lighter finished goods and reduced waste of raw materials.

In theory this means that fewer raw materials would need to be transported in order to produce the same quantity of a given product and the final product may be smaller or lighter potentially reducing the number of containers required by the shipper.

With the trade deals of the last 30 years providing a significant stimulus to trade growth, a retreat by developed countries from new deals or the withdrawal from

existing deals, may prove to be an impediment to continued growth in global shipping.

12

Global perspectives

ConsolidationAccording to key shipping observers (Drewery, Lloyds Register and Alphaliner), one of the themes expected to characterise 2018 is the continued consolidation of shipping lines.

The top seven lines control nearly 70% of global container ship capacity in a market where economies of scale are considered vital. The continued quest for scale has seen the largest shipping lines form three major alliances.

These three alliances collectively control 80% of global containership capacity, 90% of Trans-Pacific trade and 96% of Asia-Europe Trade.

The benefits of alliances are many and include the ability to capture scale without the need to commit significant amounts of capital or adding additional capacity into a market which is already oversupplied. Alliances can also improve utilisation of vessels and increase the frequency of services available to shippers.

Despite the benefits a number of potential drawbacks exist, these include a reduced scope for differentiation and the inability for a carrier to provide transparency to shippers for the entirety of the end to end process.

The three largest alliances are:

• 2M Alliance: The two largest lines, Maersk and MSC formed the 2M alliance, later adding Hyundai (38% share of global containership capacity).

• Ocean Alliance: CMA, CGM, COSCO, Evergreen and OOCL, unravelling several preceding pacts (28% share of global capacity).

• THE Alliance: Hapag-Lloyd, having merged with UASC, formed an alliance with Yang Ming, Hanjin, K Line, NYK and MOL (15% of global capacity).

The three largest Japanese lines have recently announced their intention to enter into a joint venture to commence operations in April 2018. The three lines, NYK Group, MOL and K Line, will operate as Ocean Network Express (ONE) and will remain part of THE Alliance.

In further M&A activity, COSCO announced a US$6.3 billion takeover of OOCL. When complete, COSCO will be the world’s third largest container line with over 430 vessels and 2.5 million TEU in capacity.

These moves follow the acquisition of Hamburg Sud by Maersk in 2017, the acquisition of APL/NOL by CMA CGM and the merger of COSCO and CSCL.


- 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

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Top 20 container lines

2M Ocean Alliance Independent Chartered OrderbookSource: Alphaliner

13

Global perspectives

ScrappingAs new ships are delivered into continued over capacity, scrapping will continue. In 2016 an all time record of over 670,000 TEU was scrapped. Initial forecasts were for scrapping in 2017 to be even higher, however increased demand coupled with lower scrap prices resulted in lower than expected volumes, with only 427,250 TEU ultimately scrapped in 2017.

Notably almost half of forecast scrapping will be Panamax-size ships, a class now made largely obsolete since the expanded Panama Canal was commissioned in June 2016.


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TEU

Containership demolition activity 2015-2017YTD

Intermediate (+3000-7999 TEU) Panamax (+3000 TEU) Feeder (100-2999 TEU)Source: BIMCO, Clarksons

14

Global perspectives

Excess capacityPrior to the GFC shipbuilding activity exceeded demand as shipping lines all pursued the same growth strategy -larger more efficient new-generation ships. The order book peaked at an all-time record 170 million Gross Tonnes(GT) in 2007 (pre-GFC). Even as shipping line losses continued, the order book remains at historically elevated levels.

According to Alphaliner, capacity reached a record 21 million TEU in November 2017. Capacity is expected to breach the 22 million TEU threshold at some time during 2018. This increase can be attributed to scrapping being more than offset by the arrival of new ultra-large ships.

The order book remains strong with some three million TEU to be delivered by 2020. Despite chronic over capacity, shipping lines continue to invest in new larger ships. Reports suggest CMA CGM is preparing to order six 22,000 TEU ships with the option for a further three of the same size. Once complete these ships would replace the 21,413 TEU OOCL Hong Kong as the largest container ship.

Drewery Maritime Research remains critical of the continued ordering of ultra-large ships, having identified capacity management and continued consolidation as the two key requirements for sustained liner profitability. Over capacity is partially to blame for the US$3.6 billion industry wide operating loss in 2016 although most carriers are expected to report a profit for 2017 despite a weak final quarter.

Although new ships continue to enter service and scrapping in 2017 was lower than expected, idle capacity has decreased from the highs of late 2016 when more than 1.5 million TEU, representing over 8% of the total global fleet, was idle. Total TEUs considered idle are now less than 500,000, approximately 2.4% of the of the global fleet.


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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Gro

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Capacity and demand growth

Container shipping demand Capacity GrowthSource: Crucual Perspective

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Carrier Owned Non-Carrier Owned Idle fleet share of total fleetSource: DreweryMaritime Research

15

Global perspectives

Shipping ratesAnalysts have reported a US$3.6 billion industry-wide loss for container shipping operators in 2016. This reflected over capacity coupled with depressed freight rates. Pacific rates between Asia and West Coast North America dropped below US$750 per Forty-foot Equivalent Unit (FEU), and US$1,500 per FEU to the East Coast, previously sectors which averaged US$2,000 and $US3,000 per FEU respectively.

However, trade began to increase from the end of 2016 with Drewery reporting that the average revenue per FEU in December 2016 had recovered to US$1,645, high enough to be profitable for most shipping lines.

Maersk recorded a loss of US$496 million in 2016 but reported a 2017 profit of US$356 million on the back of increased average freight rates, that were up over 14% on the same period in 2016.

Shipping rates vary for each route, by cargo and client, between shipping lines, and over time.

Various indicies such as the Baltic Dry Index (BDI, for dry bulk) seek to track price changes over time.

In container markets, two prominent indicies are Drewery’s World Container Index (WCI) and the Shanghai Shipping Exchange’s Shanghai Container Freight Index (SCFI).

The WCI uses an average of spot rates on 11 key global routes.

The Shanghai Shipping Exchange created the SCFI in 2005 as a composite of key global routes.


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World container price index

SSE - SCFI - Shanghai-Europe Drewry - WCI - GlobalSource: Drewery Maritime Research, SSE

16

Global perspectives

Ship sizeThe first container ship was introduced in 1956. The Ideal X carried 58 containers. Within eight years the Associated Steamship company had introduced ships with a capacity of nearly 1,000 TEU. Since then the capacity of container ships has continued to increase at a rapid rate. The largest ships currently in service are now almost 400 metres in length and have a capacity of more than 21,000 TEU.

The continuous pursuit of scale economies is the rationale behind the ever increasing size of container ships. Larger vessels provide cost efficiencies in fuel, crew and greenhouse gas emissions per container. However there is a question as to how much longer ships can continue to increase in size. For a start the world’s shipping lanes may simply not be wide enough or deep enough to handle vessels significantly larger than those already under construction. Additionally, returns to scale decline with size, with the attractiveness of increasing vessel size from 20,000 to 30,000 TEU being significantly less than from 10,000 to 20,000 TEU.

The current order book emphasises the pursuit of scale with ten ultra-large container vessels due to be delivered in January 2018 alone. Included in this number are seven “megamax” vessels (19,000 – 21,000 TEU) and three ships of more than 14,000 TEU. These deliveries come despite the deferment of ten ultra-large vessels by COSCO until 2019 (including six of 19,000 – 21,000 TEU) and the delay of three 14,000+ TEU vessels by Yang Ming until 2019.

COSCO has the largest order book at present with 27 vessels to be delivered between January 2018 and December 2019, including 17 between 20,000 and 21,000 TEU destined for the Asia-Europe trade route.

Bunker price plays an important role in the economies of scale achieved by larger ships. The largest savings are due to the reduced cost of fuel per container shipped but with forward bunker prices ranging from US$50/bbl to US$63/bbl, down from prices of more than US$100/bbl in 2011 and 2012, these cost advantages are reduced by up to a third (McKinsey). It is notable that nine new CMA CGM ships are to be powered by Liquefied Natural Gas (LNG).


17

Global perspectives

Bunker pricesAs shown in the graph below, bunker prices peaked pre-GFC, fell briefly (as did prices for many commodities), before firming from 2009 to 2014. Since 2015 aggressive global production (including US shale oil) has seen prices fall steeply, although recently prices have staged a recovery from near US$30/bbl to over US$50/bbl.

Heading into 2018, the oil price predictions by major organisations and investment banks are generally not widely divergent. Energy Information Administration (EIA) forecasts Brent crude oil prices to average US$50/bbl and US$61/bbl in 2018. On 10 January 2018 New York Mercantile Exchange (NYMEX) contracts suggest a range for 2018 between US$50/bbl and US$63/bbl.


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Brent FOB NYMEX FuturesSource: EIA, CME Group

18

Global perspectives

As in previous years, Chinese ports saw large increases in throughput with an average increase of 9.3%. The continued strength in the US economy saw North American port throughput grow by 8.7%, Northern Europe by 4.7% and Southern Europe by 8.2%.

The figure below presents the 20 largest ports globally by TEU. Notably ten of these are Chinese ports and a total of 15 from Asia, three from Europe, one from North America and one from the Middle East.

The global container port and terminal industry is nevertheless under pressure from two interrelated factors. First, larger shipping alliances are creating more complex and formidable counterparties.

Second, to cater for even larger containerships, ports are required to invest heavily in more capacity and new technology, driving up capital expenditure requirements and operating costs. This is true not just for major ports on the main trade routes which are required to service ultra-large container ships (14,000 TEU and over), but also ports on secondary routes who are faced with a cascade of larger vessels from main routes that have been replaced by ultra-large ships.

The capital expenditure required to service these larger ships is evident in the fact that between 2000 and 2016 nearly US$69 billion was committed across 292 port projects.

Larger ships are segmenting container terminals into those that can handle larger ships versus those that are unable to. These ships make fewer visits, creating higher peak workflows, while demanding faster handling, and creating accelerated terminal obsolescence.


International portsThe international ports sector appears to be in good health. Global throughput growth remains positive except for a decline in the fourth quarter of 2015.

Throughput growth, a key port measure, was particularly marked across the top 20 ports, averaging 4.1% for the period from 2011 to 2014, then easing to 1.2% from 2014 to 2016. According to Alphaliner, in 2017 global container throughput grew 7.7% year on year. This represents the highest rate of growth since the beginning of 2011.

This is placing greater demands on stevedores speeding up terminal automation. While shipping lines or shippers may wish ports to lower prices, global consultancy Drewery has warned that demands for lower terminal handling charges may put future port investment at risk, and so the ability to handle larger ships. The scale, cost and risk of port expansion is rising.

The consolidation occurring in the shipping industry is also having an effect on ports. As the alliances adjust their sailings to optimise utilisation and efficiencies, ports gain or lose services. In Asia for example the Port of Singapore will attract 34 weekly calls up from 29 at present. However, Port Klang in Malaysia will have port calls fall from 11 to five and Hong Kong Port will have only seven and three calls on the Northern European and Mediterranean services respectively, down from ten and five at present.

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Top 20 ports

2013 2014 2015 2016 2017Source: Annual Reports, Deloitte Analysis

19

Thought Leadership Smart Ports

20

Smart ports

Deloitte Port Services

The Deloitte Port Services team recently released a paper outlining key challenges and opportunities for port operations with one of the focus areas being smart ports.

They have also recently released a paper focused on smart port technology.

The following is primarily drawn from those reports. If you would like access to either of the full reports please contact us for a copy.

Smart ports

Data-driven technologies and the Internet of Things (IoT), combined with advanced robotics, analytics and 3D printing will redefine the future of ports.

Ports, ships, shippers and regulatory agencies increasingly operate via integrated systems which monitor, analyse and share data and market information. Technological advancements offer ports new business model opportunities and the potential to transform into smart ports.

Becoming a smart port to remain relevant

Smart ports are capitalising on the expanding IoT universe. Technology already has a strong impact on ports around the world today, but that

impact will further increase. Ports need to prepare by becoming data-minded and implementing new approaches to data management. This involves setting up new platforms, innovative delivery models and governance.

Data is key

Data analytics and data exchange are becoming a new comparative advantage for port players. Capacity sensing, route optimisation, energy management, fault detection & resolution can be done with much more efficiency. Advanced data analytics allow for streamlining and optimising existing infrastructure usage and operations by eliminating unnecessary/empty transport.

3D printing will change global shipment

3D printing will transform the cargo of ships in the future.

3D printing is driving manufacturers towards the goal of zero-inventory and will reduce the need for shipping finished goods. It will however mean increased shipment of raw materials.

Robots and sensors will continue to replace people

Increased efficiency of robotics and analytics will drive automisation evenfurther. The potential use of drones for

inspection will also lead to increased efficiencies.

The industry will move towards self-steering ships and the usage of sensors will replace the need for towing.

The Norwegian shipping company Yara, in partnership with maritime engineering group Kongsberg, is already developing the world’s first fully automated (and emission free) 120 TEU container ship planned for launch in 2018. The ship will be equipped with sensors enabling it to dock autonomously.

Technology has a dark side

Fast-evolving technologies represent unprecedented opportunities as well potential threats for ports. Cyber security and cyber-resilience are becoming more important as a parallel to physical security.

New Zealand ports and freight yearbook 2018 | Smart Ports

Security has become a top priority for ports worldwide. The International Ship & Port Security Code (ISPS) is becoming a critical factor for international shipping and transportation companies.

Maersk Cyber Attack

The importance of cyber security as a parallel to physical security is demonstrated by the July 2017 NotPetya cyberattack which affected Maersk Line and its associated container terminal operations.

The attack is estimated to have cost the company between US$200 and US$300 million dollars. Maersk was prevented from taking new orders for a number of days causing a significant negative impact on business volumes. As ports become more reliant on data driven technologies and the IoT, the risks of a similar attack damaging port operations will increase if not proactively managed.

21

Smart portsTechnological advancements offer ports the opportunity to transform into smart ports


OperationsDesign & Engineering Construction

User interfaces and applications

Software platform and control

Digital / physical integration layer

Sensors and equipment

Life cycle integration

Big data and analytics

Simulation and virtual reality

Building information modelling (in the cloud)

Ubiquitous connectivity and tracking

Additive manufacturing

3-D scanning

Intelligent construction equipment and scanning

Unmanned aerial vehicles

Mobile interfaces and augmented reality

Embedded sensors

Techn

ology in

tegration

Impact of digitalisationMuch stronger life cycle integration, new entrants

Source: Deloitte Port Services – Deloitte Netherlands

22

Smart ports – the Internet of Things

Smart ports

According to Olaf Merk, Administrator for Ports and Shipping at the International Transport Forum (ITF) "Smart ports are the only ports that will survive”. A true smart port means there is no waste of space, time, money or natural resources.

The challenges of creating a smart port correspond to the current challenges of ports: spatial constraints, pressure on productivity, fiscal limitations and the need to be green.

Technology and innovation are the driving force behind smart port productivity. This technology, in the form of physical and IT infrastructure, could be the best way to see benefits in a smart port environment.

“The ultimate smart port may be the fully automated port where all devices are connected via the IoT”, believes Peter Lundgren, Sales Director at JLT Mobile Computers, as elsewhere, the major drivers in smart ports are productivity and efficiency gains.

Port operations are starting to integrate various infrastructures, both physical and IT, including different network and positioning technologies. For smart ports to be effective it is important for the technology to be able to work together with other ports and service providers to effectively share information.

There are three main challenges driving the need for smart ports:

1. Operational excellence

2. Migrating activities (challenging external market)

3. New business opportunities

The size of a port is no longer the primary focus, but rather efficiency and smarter operations. Automation and information services can be used to address the challenges listed.

Addressing operation excellence

The primary challenge driving the IoT in seaports is operational excellence. On the supply side the main challenges are; capacity, efficiency, reliability, support and costs. On the demand side port users might want extra services like savings in time, security and traceability. Improving these drivers is where the quick wins lie for ports. Addressing the issues associated with operational excellence can be seen in current IoT implementation in ports. The digital port solutions focus on efficiency improvements such as traffic management systems, improving flow throughout the port area, automation, reducing costs, digital invoicing (customs) and improving lead time.


Migrating activities

The second challenge driving the IoT in seaports is migrating activities. The need to be smart is also driven by the challenging external market environments. Shifting transport networks also endangers traditional port leaders. Changes in global shipping routes increase competition and render the value propositions generated by IoT, like cost reductions and increased efficiency, even more important.

New business opportunities

The third challenge driving the IoT in seaports is the development of new data-driven business models. IoT applications provide more added value than only updating existing frameworks. Next to the physical flows, more emphasis will be put on data-driven models like value-added services, subscriptions, apps and anything as a service.

The Internet of Things

Seaports are playing catch-up with the large transport and logistics (T&L) players when it comes to developing insight driven solutions and IoTapplications.

Being part of both larger T&L supply chains and in itself being a cluster of companies and businesses active in the T&L sector, ports are in a unique position to fully grasp the potential generated by these new high tech developments.

Becoming a smart port means developing solutions that will address the current and future challenges faced by seaports including spatial constraints, pressure on productivity, fiscal limitations, safety and security risks and sustainability. Ports are faced with a range of technical and strategic issues. The diverse nature of a port, with a wide variety of companies operating different kinds of equipment and requiring different types of products and services, creates a complicated environment with multiple stakeholders.

Blockchain

Maersk Line has recently announced its intention to work with IBM to develop a system that will enable global trade to be conducted using blockchain technology.

The technology is intended to standardiseinformation flows and provide an open platform for those involved in the global supply chain to easily and safely exchange information in real time.

23

Smart ports - from digital to smart

Port development –becoming a smart port

Becoming a true smart port that uses the full potential of an IoT network and smart data solutions means that a port must be able to identify and take advantage of new business models.

The nature of the business makes this challenging, since it requires integration between the supply and demand side from the T&L sector, assimilating not only logistics firms, suppliers and distributors, but also their clients.

Ports have already positioned themselves in the supply chain as a place for supply and demand to meet. In other words, they represent a physical manifestation of a platform business model.

A port platform model would be represented by three parties:

• Supply – this side of the market includes inbound logistics, ship owners, terminal operators, maritime service providers, etc.

• Platform – this is represented by the platform itself. The Port provides a physical/business platform for supply and demand to meet.

• Demand – this includes outbound logistics, manufacturers inside and outside the port, and distributors.

Smart port development

The development of a smart port should be something that stems from a defined strategy. A port should have a clear business case in mind when planning its IoT implementation.


Container terminal automation

Victoria International Container Terminal (VICT) is an example of the increased utilisation of technology in the operation of modern ports. VICT has; 11 automatic container carriers, 20 automatic stacking cranes and six automatic lashing platforms. The terminal has a truck gate system where trucks are loaded and unloaded using fully automated equipment and a paperless booking system. Automated cranes are equipped with load sensing capabilities that enable the port to monitor weight distribution across individual containers. The terminal is able to operate continuously without the disruption previously caused by shift changes. Automated stacking cranes and container carriers move containers precisely without the risk of damage or misplacement.

24

Smart ports – the development of a smart port

Challenges ahead

Firstly the port needs to determine what they want to achieve by becoming a smart port. The strategic goal should go beyond increased efficiency improvements and focus on long term strategy, where insights are distilled from smart applications enabling a transition towards an insight driven company.

The challenge that ports face is that a large variety exists between ports e.g. pure bulk port versus a container port.

A second challenge is the increased focus on cyber security. The port industry is responsible for customer data, which is extremely valuable, and are also responsible for physical goods.

Currently, port security is limited to the global ISPS code, which focuses on physical threats. Ports need to be aware that digital threats are just as significant, especially if ports continue on their path towards digitalisation.

For smart ports to operate effectively there will need to be co-operation between ports in order to share data and insights.

This will present another challenge as there is a certain level of protectionism by each port of their data.


The final level of integration will be a result of stakeholder management and determination shown by the port.

Becoming a smart port, driven by smart technology like IoT, is a fundamental part of the future of ports.

Ports of the future

Shipping plays a major role in our global economy and seaborne trade has quadrupled since the late 1960’s. The port industry has embraced new technologies over time, but has not yet been disrupted by the massive growth in new technologies. Blockchain, 3D printing and smart mobility technologies all have the potential to dramatically impact the shipping industry according to Smart Ports: Competitive Cities by Siemens. Cities and their ports need to strategiseas to how best prepare, change and benefit from current and future technologies.

According to Siemens, ports of the future will be:

• Electric – powered only by electricity

• Digital – a single system, where all elements are digitally connected

• Emissions free – terminal operations and docking vessels will run only on electricity

• Clean – the port will be clean and vessel waste recycled

• Highly efficient – ports will be able to increase handling capacity through increased automation

• Secure – using automated container screening technologies and digital security monitoring.

• Transparent – new technologies will improve transparency and reduce costs associated with running local customs operations.

• Employers – ports will continue to source local employment and new technologies will require more highly skilled people.

Managing the port of the future

Managing the port of the future and its various complex applications, processes and systems while optimising safety, security, energy efficiency, cost and environmental care will continue to be an ever increasing challenge. Ports will have to rely more and more on technology.

Other logistics hubs are already starting to digitally integrate their distributed systems and partners in order to move passengers and freight more smoothly, efficiently and in a more cost effective way.

Terminal operations

Terminal operators today need to off-load larger and larger vessels, reduce throughput times and manage landside logistics. Terminal operators are relying on technology to meet these challenges. Cranes off-loading containers from ships, transporting containers, scanning containers, certifying cargo – all of these activities take place within the dock yards and transfer areas.

The technology used to complete all of these operations is crucial to terminal operators as they increase throughput, reduce the cost per container handled and reduce the amount of time required for moving goods into and out of the terminal.

25

Thought LeadershipPort / City Duality

26

Port / city duality

Port / city duality

Many of the world’s major cities grew in size and wealth on the back of the trade that flowed through their ports. As ports have become more industrialised a disconnect between port and city has developed. Mechanised port traffic and operations coupled with security concerns mean that it is no longer feasible for the public to be allowed unrestricted access to port areas.

Despite the spatial disconnect, ports retain their influence on the economic strength of global metropolitan centres and their regions.

Ports and cities have also developed an institutional disconnect as a result of increased privatisation in the sector.

Where once ports were owned and operated by central government or local authorities, internationally this role has increasingly been performed by private companies whose primary responsibilities are to their shareholders, rather than the city or community as a whole.

The number of people that have first hand experience of interacting with ports has decreased significantly with the advent of mechanisation and containerisation. The hundreds of workers previously employed by ports to load and unload cargo have been replaced by automated container

New Zealand ports and freight yearbook 2018 | Port / City Duality

stackers or quay cranes that require only one person to operate them.

The disconnect between ports, the urban environment and residents has stimulated a great deal of discussion on the place of ports within a city.

The expansion of both ports and cities has brought the spatial constraints of the port / city relationship into focus.

Local policy makers are well aware of the vital role ports play in an economy and that the development of ports is crucial to continued prosperity. However, ports located in or near the city centre are often seen as undesirable by residents due to noise and environmental impacts.

City growth places a strain on available land and forces land values upward. As a result, key operations of local ports are being relocated to sites where there is less impact on cities and their residents.

With the relocation of some port functions, the development of the areas previously occupied by a port is key to the economic growth of local economies.

27

Port / city duality


Port-related waterfront development

As discussed in The Competitiveness of Global Port-Cities: Syntheses Report released by the OECD, port-relatedwaterfront development might present an opportunity to create a new image for a city or a region.

A number of former port areas are being redeveloped into bustling working and living areas.

Port redevelopment offers a new waterfront focal point for residents and visitors. The most successful examples of waterfront development have tended to focus their land use on non-maritime functions including:

• commercialising the location i.e. marinas, fisheries and aquariums;

• applying the port function to the tourism industry i.e. cruise passenger terminals;

• utilising the ports maritime history i.e. preserving and adapting historic buildings for new uses; and

• organising events that will attract locals and tourists to the port.

The right mix of functions for successful waterfront redevelopment

Successful waterfront projects, have generally achieved the right mix of diversified functions that render the waterfront area economically vibrant. In most port redevelopments the mix of functions that attract people, tourism, and business and in turn create economic value, consist of the following:

• port functions;

• developing recreational and cultural activities; and

• expanding food related businesses such as food markets or restaurants.

For example, Port Vell in Barcelona attracts more than 16 million visitors per annum.

The old port area was transformed through an interesting and vibrant mix of functions. Port Vell continues to operate as a port through marina facilities, ship repair dockyards, and a cruise terminal. It now offers numerous cultural and recreational activities, including a Maritime Museum, Aquarium and water sports facilities. The historic former warehouse, Palau de Mar, has been refurbished to accommodate restaurants where visitors are able to enjoy waterside dining.

Fisherman’s Wharf in San Francisco has had similar success by developing a range of waterfront seafood restaurants and markets in an area previously reserved for fishermen and their fleets. Despite the redevelopment a number of fishing vessels still use the area as their base of operations.

Darling Harbour in Sydney is an example of a successful redevelopment following the decline and obsolescence of the existing port. Darling Harbour for many years hosted warehousing and woolstoresin addition to extensive rail yarding operations. A government review in the 1980’s deemed port operations to be inefficient and recommended their relocation. The New South Wales government then announced their intention to redevelop the area. An aquarium was opened in 1988 shortly followed by museums, shops, hotels and bars. Other attractions include Chinese Gardens, a convention centre and public parks. Development continues to this day with a major business and residential project in progress, supplemented with further open public spaces. Reinforcing the areas link with the city.

28

Port / city duality


Port history

Liverpool’s waterfront area utilises its portheritage as a catalyst for the tourism industry. The waterfront has preserved a great deal of port related heritage making it an attractive destination for tourists and residents alike. The photo to the right shows the port in its present state. The refurbishment and retention of the historic port buildings, and their contribution to making the waterfront a vibrant location, is clear.

Port history does not necessarily need to be included as part of a successful redevelopment. The Dongjian Bay Scenic Area in Tianjin, China houses the largest manmade sand beach in China and Asia’s largest cruise port. This redevelopment has created a new area for the city’s tourism and cultural industries without including the area’s historical background.

29

Domestic Environment

30

Economic environment

Reserve Bank Monetary Policy Statement February 2018

On 7 February 2018, the Reserve Bank of New Zealand (RBNZ) left the Official Cash Rate (OCR) unchanged at 1.75%.

Global economic growth continues to improve, although inflation and wage outcomes remain subdued. Commodity prices have increased. Bond yields and credit spreads remain low although they have increased since November and equity prices are near record levels but are exhibiting increased volatility. Monetary policy remains easy in the advanced economies but is gradually becoming less stimulatory.

The exchange rate has firmed since the November Statement largely due to a weak US dollar. RBNZ assumes the trade weighted exchange rate will ease over the projection period.

GDP growth eased over the second half of 2017 but is expected to strengthen in response to accommodative monetary policy, high terms of trade, government spending and population growth.

Employment growth has been strong and GDP growth is projected to strengthen, with a weaker outlook for housing and construction offset by accommodative monetary policy, the continued high terms of trade, and increased fiscal stimulus.

The RBNZ has revised its November estimates of the impact of Government policies based on Treasury’s Half Year Economic and Fiscal Update. The predicted net impact of these policies has been revised down in the near term although the Kiwibuild Programme will contribute to residential growth from 2019.

Annual CPI inflation was 1.6% in December, lower than expected due to weakness in manufactured goods prices. Non-tradables inflation is moderate but expected to increase gradually as capacity pressures increase. Tradables inflation has remained subdued. Overall, CPI inflation is projected to remain near the midpoint of the target range and longer-term inflation expectations are well anchored at 2%.

Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.

Quarterly Predictions, December 2017

According to NZIER the growth outlook is slightly softer as population growth slows.

There is much uncertainty over the effects of the new Government’s policies. Nonetheless, the New Zealand growth outlook remains positive.

Quarterly Survey of Business Opinion, Predictions, December 2017

NZIER report that confidence fell in the September quarter, with only a net 7% of businesses expecting an improvement in general economic conditions.

A decline in business confidence is not unusual heading into a general election. Although economic activity has come off the boil, businesses expect a rebound in demand in the next quarter.

New Zealand ports and freight yearbook 2018 | Domestic Environment

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

%

Official cash rate

Source: RBNZ statistics

31

New Zealand Freight Task

32

New Zealand freight task

This section reproduces elements from Deloitte’s 2017 Ports & Freight yearbook.

The information in this section is drawn from the National Freight Demand Study, a pivotal source of information for New Zealand’s freight task. The first National Freight Demand Study (2008) guided freight infrastructure and investment and land-use planning decisions across the public and private sectors.

The National Freight Demand Study was updated in 2014, and has not been updated since.

The primary sector is New Zealand’s key generator of domestic freight, much of it destined for export. The flows are from source (farm gate or plantation forest) either direct to ports for export (such as logs) or more usually via intermediate processing industries (dairy factories) for both domestic consumption and / or export. Favourable export conditions and a buoyant construction sector have supported the strength in forestry, while dairy has enjoyed rapid expansion (much enabled by irrigation). Dairy alone exceeds the tonnage of all other agricultural commodities: livestock, meat, wool, horticulture, grains and fish.

Petroleum and coal freight are concentrated on a few key regions where the resources are located and extracted, coal from West Coast and Waikato, and petroleum from Taranaki and Northland where it is imported and refined.

Key construction materials, aggregate and cement, are also produced in high volumes, although generally close to domestic markets given their bulk and relatively low unit value. Manufactured and retail goods, whether domestically made or imported, are usually smaller and of greater unit value, and are transported greater distances.

New Zealand ports and freight yearbook 2018 | New Zealand Freight Task

-

10

20

30

40

50

60

- 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Mill

ion

tonn

es

Bill

ion

tonn

e-ki

lom

etre

s

New Zealand freight generated by commodity

Billion tonne-kilometres Million tonnesSource: NFDS 2014

33

Regional freight generation

Clear patterns are evident in domestic freight flows. Primary producing areas generate flows to export ports, typically via processing facilities. Population is a major driver of both consumption and manufacturing activity.

The Golden Triangle (Auckland, Waikato, Bay of Plenty) combines both population and primary industries (forestry and dairy) to account for 45% of all freight tonnage produced.

Canterbury is the dominant freight generator in the South Island producing 15% of the national freight task.

Manufacturing and retail freight tonnage correlate strongly with population, notably in Auckland and Canterbury, which host manufacturing hubs, large scale distribution centers, and receive consumer goods through their ports.

The primary sector is located in regions offering favourable topography, climate, and soil.

Waikato, Taranaki, Manawatu, and Southland are well-suited to dairy production, as well is Canterbury if irrigation is available, with dairy accounting for over 20% of total freight generated for these regions. This is similar for forestry, where warm climate and lower-value land have attracted

substantial plantings in; Northland, Waikato, Bay of Plenty, Gisborne, Hawkes Bay, and Tasman / Nelson / Marlborough.

Forestry accounts for 35% of freight in these regions (except Waikato at 16% and Northland at 26%).

Crude oil flows are either direct export (from Taranaki) or direct import (to Marsden Point in Northland). Domestic transport of petroleum products is primarily from the Northland refinery to coastal distribution, with a rising direct import share, and then by truck to the nation’s service stations. West Coast coal production is principally for export via Lyttleton, while Waikato coal serves the domestic market in the upper North Island. Cement is manufactured at a plant in Northland for distribution by coastal ships and then road and rail. Cement was manufactured in the West Coast of the South Island but this has been superseded by direct import.

Southland hosts the Tiwai Point Aluminium Smelter, which while generating largely direct import / export flows, accounts for almost 10% of the regions total freight flows.


New Zealand regions

Regional freight generation

Gisborne (GIS)

Auckland (AKL)

Waikato (WAI)

Taranaki (TAR)

Manawatu (MAN)

Wellington (WLG)

Hawke’s Bay (HKB)

Bay of Plenty (BOP)

Northland (NTH)

Tasman Nelson Marlborough (TNM)

Canterbury (CAN)

Otago (OTG)

West coast (WST)

Southland (STH)

34


Total freight generated (million tonnes)

Dairy Forestry Other Agri Petroleum Coal Aggregate CementManufctrd

Goods Retail Other TotalNTH 1.29 4.35 0.72 2.73 0.06 1.69 2.45 0.28 0.03 3.28 16.88AKL 0.73 1.44 1.58 1.40 0.06 5.76 2.76 9.91 11.77 13.98 49.39WAI 7.08 5.15 2.72 0.00 1.77 5.70 1.68 1.02 0.24 6.70 32.06BOP 1.62 9.80 2.20 1.03 0.00 1.24 1.57 1.26 0.49 5.83 25.04GIS 0.02 1.87 0.63 0.00 0.00 0.27 0.06 0.08 0.00 0.86 3.79HKB 0.27 3.57 1.85 0.22 0.00 0.70 0.93 0.54 0.14 2.07 10.29TAR 2.69 0.26 0.91 0.49 0.00 0.42 0.67 0.48 0.01 1.69 7.62MAN 2.19 1.70 1.64 0.00 0.00 1.09 0.26 0.51 1.35 1.82 10.56WLG 0.33 0.89 0.41 0.58 0.00 1.43 0.69 0.96 0.60 2.52 8.41TNM 0.39 3.34 1.07 0.27 0.00 1.02 0.56 0.36 0.07 2.24 9.32WST 0.65 0.43 0.12 0.00 2.50 0.03 1.43 0.07 0.04 0.27 5.54CAN 5.12 1.54 3.97 0.93 0.05 5.30 2.94 3.27 3.26 9.01 35.39OTG 1.24 1.52 1.05 0.28 0.09 1.84 0.86 0.48 0.24 2.44 10.04STH 2.79 1.40 1.12 0.21 0.52 0.51 1.11 0.21 0.05 3.77 11.69TOTAL 26.41 37.26 19.99 8.14 5.05 26.99 17.98 19.45 18.31 56.48 236.02Source: NFDS 2014

Total freight generated (billion tonne-kilometres)

Dairy Forestry Other Agri Petroleum Coal Aggregate CementManufctrd

Goods Retail Other TotalNTH 0.11 0.61 0.08 2.42 0.00 0.07 0.24 0.06 0.00 0.21 3.80AKL 0.07 0.41 0.11 0.07 0.00 0.20 0.04 1.77 1.86 0.67 5.20WAI 0.50 0.43 0.28 0.00 0.08 0.30 0.14 0.15 0.03 0.39 2.30BOP 0.17 1.05 0.23 0.12 0.00 0.03 0.18 0.24 0.09 0.49 2.60GIS 0.01 0.27 0.13 0.00 0.00 0.01 0.00 0.03 0.00 0.15 0.60HKB 0.04 0.50 0.19 0.01 0.00 0.04 0.10 0.13 0.03 0.17 1.20TAR 0.29 0.03 0.12 0.06 0.00 0.01 0.13 0.10 0.00 0.06 0.80MAN 0.42 0.24 0.21 0.00 0.00 0.02 0.00 0.13 0.20 0.08 1.30WLG 0.05 0.08 0.07 0.05 0.00 0.02 0.02 0.30 0.25 0.06 0.90TNM 0.05 0.41 0.15 0.09 0.00 0.03 0.02 0.11 0.01 0.23 1.10WST 0.07 0.08 0.01 0.00 0.86 0.00 0.29 0.03 0.01 0.03 1.38CAN 0.41 0.15 0.45 0.05 0.00 0.07 0.11 0.99 0.49 0.58 3.30OTG 0.12 0.27 0.20 0.02 0.01 0.03 0.06 0.18 0.03 0.18 1.10STH 0.22 0.10 0.20 0.02 0.08 0.01 0.09 0.10 0.02 0.16 1.00TOTAL 2.53 4.64 2.43 2.91 1.03 0.84 1.43 4.32 3.00 3.45 26.30Source: NFDS 2014

- 10 20 30 40 50

NTHAKLWAIBOPGIS

HKBTARMANWLGTNMWSTCANOTGSTH

Million tonnes

Total freight generated

Dairy Forestry Other Agri Petroleum CoalAggregate Cement Manufctrd Goods Retail Other

Source: NFDS 2014


- 1 2 3 4 5 6

NTHAKLWAIBOPGIS

HKBTARMANWLGTNMWSTCANOTGSTH

Bill ion tonne-kilometres


Dairy Forestry Other Agri Petroleum Coal

Aggregate Cement Manufctrd Goods Retail Other

Source: NFDS 2014

35

NZ sea export volumes and values


Sea export volume rolling 12 month totals

This commentary and highlights are drawn from the FIGS release for the period to June 2017.

Trade export volumes, having grown strongly over the last decade, have eased since 2014.

Wood products are still the largest volume of exports, steadily increasing over time.

Sea export value rolling 12 month totals

Dairy remains the highest value export with a steady increase in export value over time.

With falling dairy prices the export value dropped over 2016 but has begun to increase again in 2017.

- 10,000 20,000 30,000 40,000 50,000

08Q4 09Q3 10Q2 11Q1 11Q4 12Q3 13Q2 14Q1 14Q4 15Q3 16Q2 17Q1

000

tonn

es

NZ sea export volume rolling 12 month totals

Confidential and other MeatFish, fruit & veg and animal other DairyMinerals, coal and fuel Chemicals and plasticWood products Paper products, textiles and otherMetals, machinery, vehicles and electrics

Source: FIGS, Deloitte analysis

- 10,000 20,000 30,000 40,000 50,000

08Q4 09Q3 10Q2 11Q1 11Q4 12Q3 13Q2 14Q1 14Q4 15Q3 16Q2 17Q1

$ m

illio

ns

NZ sea export value rolling 12 month totals

Confidential and other MeatFish, fruit & veg and animal other DairyMinerals, coal and fuel Chemicals and plasticWood products Paper products, textilesMetals, machinery, vehicles and electrics


Coal exports declined in 2014 and 2015, reflecting falling prices and troubles at Solid Energy (in liquidation). Coal prices have remained constant since 2015.

36

NZ sea import volumes and values


Sea import volume rolling 12 month totals

After a drop in sea import volume in 2009, post-GFC, volumes have resumed growing. Fuel remains the largest import volume remaining fairly consistent over time.

The second largest imported item is foodstuffs which has grown consistently over time with a large spike in imports in 2015.

-

5,000

10,000

15,000

20,000

25,000

2008Q4

2009Q3

2010Q2

2011Q1

2011Q4

2012Q3

2013Q2

2014Q1

2014Q4

2015Q3

2016Q2

2017Q1

000

tonn

es

NZ sea import volume rolling 12 month totals

Confidential and other Meat, fish, dairy and other FoodstuffsMinerals, coal and fuel Chemicals and plastics Wood and paper productsTextiles, footwear and other Metals Machinery and electricVehicles (road and rail)


-

10,000

20,000

30,000

40,000

50,000

2008Q4

2009Q3

2010Q2

2011Q1

2011Q4

2012Q3

2013Q2

2014Q1

2014Q4

2015Q3

2016Q2

2017Q1

$ m

illio

ns

NZ sea import value rolling 12 month totals

Confidential and other Meat, fish, dairy and other FoodstuffsMinerals, coal and fuel Chemicals and plastics Wood and paper productsTextiles, footwear and other Metals Machinery and electricVehicles (road and rail)


Sea import value rolling 12 month totals

After a drop in 2009 post-GFC, the value of sea imports have resumed growing.

Vehicles are now the highest value imported item showing a significant increase over time.

The value of fuel has decreased over time reflecting the decrease in fuel price from 2012.

37

TEU volumes and heavy traffic counts


Traffic counts

The State Highway 1 (SH1) heavy traffic counts from the New Zealand Transport Agency (NZTA) have not yet been released for the last six months of 2017.

The most recent data available is the traffic data to June 2017.

Viewing the heavy vehicle traffic counts at key remote SH1 monitoring sites over a longer period reveals steady annual growth beneath the seasonal effects.

The Kaikoura earthquake struck on 14 November 2016, resulting in traffic through Kaikoura ceasing immediately, and Blenheim being largely by-passed.

SH1 north of Kaikoura was re-opened in December 2017.

The indicated growth is consistent with ANZ’s Truckometer survey, which aggregates all heavy vehicle traffic, and with the NFDS forecasts of 2.5% - 3.0% annual growth.

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

Traf

fic c

ount

SH1 heavy traffic counts

Wellsford Taupiri TaupoSanson Ohau BlenheimKaikoura Waipara Milton

Source: NZTA

-

10%

20%

30%

40%

50%

60%

70%

80%

14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2

Perc

em

tage of carg

o

Cargo on ships 4,000 TEU or more

AKL TRG NPE WLG LYT POE


Cargo on ships 4,000 TEU or more

Ships of 4,000 TEU or more handle a significant share of the import and export containers at the following ports: Port of Auckland, Port of Tauranga, Napier Port, CentrePort, Lyttleton Port and Port of Otago.

The drop off for cargo on ships 4,000 TEU or more in Q1 and Q2 of 2017 for CentrePort was due to the November 2016 Kaikoura earthquake. After the earthquake CentrePort was not able to use its two gantry cranes for loading and unloading containers. Following remedial work the gantry cranes began operating again in 17Q3.

The only ships able to load directly at the port were those with their own cranes.

Ships visiting the Port of Tauranga of 4,000 TEU or more have continued to trend upwards, Port of Tauranga is now able to take ships that are 11,000 TEU due to dredging work that was completed at the Port.

38

Import, export and transhipment and TEU volumes

Import, export and transhipmenttrends

The Port of Tauranga recorded the largest overall TEU movements, with a total of 818,000 TEU movements as at 17Q3.

Tauranga also had the largest export movements, with 448,000 TEU movements as at 17Q3 .

The Port of Auckland is still the largest import port with 378,916 TEU movements compared to The Port of Tauranga’s 352,000 TEU import movements as at 17Q3.


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TEU

Import, export and transhipment

Imports Exports Export tranship Import transhipSource: FIGS, Deloitte analysis

Container trade expands

Containerised imports and exports continue to grow, albeit at lower rates.

Coastal volumes have been up markedly since 2014 and paradoxically, transhipments trended downwards potentially raising a question regarding the capturing of information for coastal and tranship volumes.

TEU volumes

Since 2012, imported TEU volumes are up 27% and exported TEU volumes are up 23%.

After a drop in transhipments from 2014 to 2016, transhipments have increased significantly. Since 2012, transhipmentshave increased by 28%.

Domestic TEU volumes plateaued over 2015 and 2016 and have begun to increase again in 2017.

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Domestic Tranship+other Import ExportSource: FIGS, Deloitte analysis

39

TEU capacity of ships visiting New Zealand

Bigger ships

As discussed in global perspectives, for several decades container ships have been getting progressively larger. The race to build more and larger ships has maintained a frenetic pace even post-GFC.

By 1988 the largest container ship was approaching the maximum capacity of the Panama Canal (the Suez presents no such size restrictions). Yet ships got even bigger, reaching 8,700 TEU by 1998, and 19,000 TEU by 2015. The merits of larger ships reflects economies of scale.

With the increase in ship size, ports have had to invest in infrastructure. In 2002 P&O (now Maersk) introduced a fleet of new 4,100 TEU ships into New Zealand a step up from the previous largest 3,500 TEU.

More recently, 5,500 TEU ships have been rostered in to cater for peak export months.

Maersk introduced 9,500 TEU ships on its Triple Star service in late 2016.

This new service links Tauranga (New Zealand's only port this service links to) with; Asia (Japan, Korea, China and Taiwan), South America (Peru, Chile, Panama, Colombia and Mexico). Tauranga is the first port to complete


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Total TEU capacity of ships visiting New Zealand

1-999 1000-1999 2000-2999 3000-3999 4000-5999 6000-7999 8000+Source: FIGS, Deloitte analysis

dredging to 14.5 meters, enabling larger vessels to visit. Tauranga has also become New Zealand’s first port to handle 1 million TEU.

The proportion of TEUs transported in New Zealand on ships larger than 4,000 TEU was 15% in the first quarter of 2013. By the third quarter of 2017 this had increased to 48% mirroring the global trend of increasing ship sizes.

0%10%20%30%40%50%60%70%80%90%

100%

13Q1 13Q3 14Q1 14Q3 15Q1 15Q3 16Q1 16Q3 17Q1 17Q3

%

Proportion of total TEU's by ship size

1-999 1000-1999 2000-2999 3000-3999 4000-5999 6000-7999 8000+Source: FIGS, Deloitte analysis

40

New Zealand ports and freight yearbook 2018 | New Zealand Feight Task

Refined product is also imported to supplement the refinery’s capacity. The refinery itself imports its crude oil feedstock (with domestic crude oil production exported).

Coastal shipping

Coastal shipping plays a key role in New Zealand’s domestic freight task, being principally specialist bulk ships (such as petroleum and cement) and inter-island RORO ferries. In the general freight market domestic ship operators are confronted by two key challenges: competition with other transport modes (road, rail and air), and competition with international ship operators.

While coastal shipping provides slower transit times relative to other modes, shipping delivers lower emissions and prices. Coastal capacity can also be readily expanded and would require

limited additional port infrastructure.

There has been an increase in coastal shipping post the Kaikoura earthquake. This could represent a sustainable uplift for coastal operators reflecting lower prices than traditional rail or road freight, demonstrated resilience and increasing frequency of ships. State Highway 1 which was damaged in the Kaikoura earthquake was reopened in December 2017.

Coastal bulk volumes

Coastal volumes are dominated by bulk trades in petroleum products from the refinery at Marsden Point (Whangarei)

and cement from Portland (Whangarei). The coastal freight task for petroleum products is some 2.55 million tonnesshipped throughout New Zealand from Marsden point in the year to September 2017, up from 2.29 million tonnes in the year to September 2016.

Tauranga was the single largest destination for deliveries from Marsden Point, with around 550,000 tonnes of refined petroleum products being delivered in the year to September 2017.

Petroleum product is piped from the refinery in Marsden Point to Wiri(Auckland) and Z Energy ships fuel on the barge Awanuia to Auckland.

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Dec 11 - Sep 12 Dec 12 - Sep 13 Dec 13 - Sep 14 Dec 14 - Sep 15 Dec 15 - Sep 16 Dec 16 - Sep 17


41

Port Performance

42

Operations

Major container ports

Tauranga and Auckland continue to be the dominant players in the market with a combined market share of 62% of all containers handled in 2017.

TRG – As in 2016, TRG maintains its position as New Zealand’s largest port by container throughput. In 2017 the port became the first in New Zealand to handle more than one million TEU. TRG remains the only New Zealand port with capacity for ships in excess of 6,500 TEU.

AKL – Auckland remains New Zealand’s second largest port handling 952,331 TEU in 2017.

Highest growth

TRG container volumes grew 13.8% from FY16 to FY17 rising from 954,000 TEU to almost 1,086,000 TEU. Napier Port also experienced significant growth in container throughput with an increase of more than 12%.

Other movements

No port saw a decline in container throughput. With Timaru experiencing only a modest increase of 0.6% from 84,400 TEU to 84,946 TEU.

New Zealand ports and freight yearbook 2018 | Port Performance

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43

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Domestic Tranship Import ExportSource: FIGS

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44

Composition


Import volumes

AKL has the highest import volumes in the country and accounted for more than 35% of total domestic import volumes.

The proportion of imports that arrive in TRG have increased from approximately 24% of domestic import volumes in 2014 to 33% in 2017.

The third largest container port, LYT, processed 9.6% of import volumes.

Export volumes

TRG is the largest export port in New Zealand by TEUs with approximately 43% of total domestic export volumes. AKL is the second largest export port by TEUs however its share of total domestic export volumes is less than half that of TRG at around 19%.

Domestic

AKL and LYT have the highest domestic volumes. 31% and 29% respectively.

In the last three years TIU has experienced domestic volume growth in excess of 500%. Conversely WLG has seen volumes fall approximately 56% reflecting the effects of the 2016 Kaikouraearthquake.

Transhipment

TRG has the highest transhipmentvolumes among New Zealand ports with over 47% of total volume.

AKL has the second highest proportion at 23%.

Import - Export mix

AKL and NPE both have significant import and export imbalances. AKL import volumes are nearly twice as large as export volumes while NPE has import volumes almost two thirds of export volumes. The ratio of imports to exports for the remaining ports ranges from 0.79 to 1.29. The most balanced port is NSN with a ratio of imports to exports of 1.06.

Containerised vs bulk cargo

The chart to the right shows the proportion of cargo that is containerisedor bulk , in GWT, by port. Containerisedcargo accounts for approximately 75% of cargo tonnage for AKL. NPL and MLB are 100% bulk ports and handle no containers. The most balanced port is POE with a bulk to container ratio of 1.04.

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Port throughput - containerised vs. bulk

Containerised BulkSource: FIGS

45

Container terminal efficiency


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AKL LYT NPE POE TRG WLGSource: FIGS

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AKL LYT NPE POE TRG WLGSource: FIGS

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AKL LYT NPE POE TRG WLG

Source: FIGS

NZ port ship rates - containers/hour

2015 2016 2017Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep

AKL 88.6 91.3 87.0 81.2 85.1 82.8 79.4 79.4 76.2 78.5 83.5

LYT 59.5 61.3 64.4 61.7 62.5 55.1 68.1 58.7 58.9 58.1 61.6

NPE 61.3 54.4 60.5 58.4 57.4 54.9 57.0 57.2 59.7 56.3 54.9

POE 60.9 58.4 56.4 62.9 62.5 60.0 60.8 61.4 61.0 60.9 60.3

TRG 80.8 83.0 82.9 86.6 85.7 82.9 88.8 89.8 93.5 84.4 85.2

WLG 54.4 48.1 51.6 52.8 46.5 52.0 51.3 52.6

NZ port crane rates - crane lifts/hour


AKL 36.4 37.3 36.7 36.1 37.3 36.2 35.0 34.9 34.0 34.8 35.9

LYT 30.4 31.4 31.9 31.3 32.7 31.5 33.5 30.4 29.9 30.1 30.6

NPE 24.2 23.4 24.9 24.4 23.1 22.6 23.8 23.8 22.9 22.5 23.7

POE 33.9 32.2 32.7 33.6 34.0 33.0 33.1 34.7 33.0 33.4 33.4

TRG 36.4 35.6 35.9 35.6 35.7 35.2 35.9 35.9 37.4 35.6 35.5

WLG 30.9 28.9 29.8 30.0 27.9 31.2 32.7 33.7

NZ port vessel rates - containers/labour hour


AKL 73.4 80.1 77.2 72.3 75.0 72.6 70.1 71.4 68.7 70.4 72.7

LYT 41.9 42.8 47.3 50.1 51.5 44.5 54.6 47.7 47.0 46.8 50.5

NPE 45.2 43.1 44.6 45.0 41.0 39.9 41.2 40.6 44.8 42.4 40.4

POE 50.1 47.8 45.5 52.5 51.2 49.4 48.6 50.6 49.9 50.8 50.2

TRG 65.1 62.4 67.5 70.5 66.9 66.1 69.7 70.7 73.0 65.7 65.0

WLG 47.0 39.1 44.8 47.7 39.4 42.2 43.9 46.2

46

Port utilisation

Container ship utilisation

The three largest container ports, AKL, TRG and LYT, had the highest container ship utilisation, followed by POE and NPE.

Crane utilisation is significantly higher in AKL than at other ports.

Estimates for NPL and MLB were excluded due to their lack of a container wharf.

Bulk terminal utilisation

NPE had the highest bulk terminal utilisation (bulk tonnes / bulk terminal ha) and TRG the highest land utilisation (bulk tonnes/general wharf metre).

Container terminal utilisation

LYT had the highest container terminal utilisation (TEU/terminal ha).

TRG had the highest TEU throughput per container wharf metre.

Estimates for NPL and MLB were again excluded due to their lack of a container wharf.


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Bulk Tonnes / Bulk Terminal ha Bulk Tonnes / General Wharf MetreSource: Management information, Deloitte analysis

47

Financials

Revenue

TRG reported the highest revenues in FY17 at $270 million an increase of 4.2% on FY16. Followed by AKL with $228 million in reported revenue.

Overall revenue in FY17 increased from that reported in FY16 for seven ports. Revenue growth was attributed to a number of different drivers.

TRG – increased cargo volumes due to new services and the arrival of larger ships.

NPE – a 35% increase in log volumes and 12% increase in container volumes

NSN – Log volumes 30% ahead of budget and record TEU throughput.

MLB – strong log volumes coupled with significant increases in cement and fish trades.

LYT – record container throughput of more than 400,000 TEU

TIU – 26% increase in log volumes

POE – increased container and log volumes.

Revenue decreases

A number of ports reported a decrease in revenue. The most significant was the 16.4% decrease for WLG attributed to the disruption caused by the 2016 Kaikouraearthquake.


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Profitability

Reported Profit Tax Interest Depreciation ExpensesSource: Annual Reports

48

Financials

Dividends

All port shareholders except WLG received a dividend in 2017. WLG elected not to pay a due to the damage sustained by the port in the 2016 Kaikoura earthquake.

TRG paid the largest dividend, $109 million. This dividend included the FY17 interim dividend ($34 million), FY16 final dividend ($40.8 million) and FY16 special dividend ($34 million)

AKL paid a dividend of $53.7 million this consisted of the FY17 interim dividend ($25.3 million) and final FY16 dividend ($28.4 million)

Capital expenditure

A number of ports are engaged in large capital investment projects to further develop port capacity and capability.

AKL has invested in 27 new automated straddle carriers. The port is also entering the final stages of expansion of the container terminal.

TRG has commissioned two new ship to shore gantry cranes and completed a new purpose built warehouse.

NSN focused a significant amount of capital work on earthquake prone buildings to enhance the quality of port infrastructure.


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49

Financials

Debt covenants

The ratios below provide an indication of a company’s capacity to borrow additional debt and to service existing debt.

Gearing is calculated as debt divided by debt plus equity.

Average gearing across all ports in 2017 was 23% up from 17% in 2016. This figure excludes LYT which reported no borrowings in 2017.

Interest cover is calculated as normalisedEBIT divided by net interest expense.

MLB and BLU have the two highest ratios at 23.0 and 18.8 respectively. This was due to a reduction in net interest expense.

Cash net debt

Cash net debt is calculated as interest bearing liabilities less cash and equivalents. Total net debt for all ports in 2017 was $1.0 billion, up 7.1% from $937 million in 2016.

Net debt for the two largest ports, TRG and AKL, increased 21.6% and 16.4% respectively.

NSN had the largest percentage increase in net debt at 59.7%. While TRG had the largest increase in dollar terms ($66.6 million)

The largest reduction in net debt was reported by WLG falling from $101.9 million in 2016 to $35.9 million in 2017

MLB and BLU also both reported a reduction in net debt.

LYT remains debt free following a 2014 insurance settlement.


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50

Comparator tables


Port Facilities & Capacity ComparisonAKL TRG NPL NPE WLG NSN MLB LYT TIU POE BLU

Port Harbour Type Natural Natural Breakwater Breakwater Natural Natural Natural Natural Breakwater Natural NaturalDraught (m) (min) 12.5 14.5 12.5 12.41 11.4 10.3 13.5 12.4 11.6 13.5 7Port Operating Land (ha) 77 190 65 49 70 42 10 90 40 25 40Container Terminal Area (ha) 34 75 - 17 24 12 - 14 10 15 3Total Wharf Length (km) 3.59 2.83 1.72 1.61 2.94 1.40 0.62 2.70 1.72 2.83 1.92Container Wharf Length (km) 0.97 0.77 0.00 0.39 0.13 0.38 - 0.59 0.48 0.60 0.43Quay Cranes 5 8 - - 2 - - 4 - 2 -Mobile Cranes - - 3 6 - 3 - - 3 - 2Forklifts/Stackers 14 - 4 35 19 18 - 2 14 5 7Straddles 39 46 - - 6 - - 24 - 16 -Reefer Slots 1,133 2,090 - 1,111 450 904 - 546 650 1,850 200Tugs 4 3 3 2 2 3 - 2 2 3 2Pilot Launches 2 2 2 1 2 1 - 1 1 2 1Rail Connection Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes

Bulk Tonnes Handled (millions) 6.5 20.1 5.2 2.5 2.3 1.4 0.8 3.7 1.5 1.3 2.7NZ Cargo Volume Rank 2 1 3 6 7 9 11 4 8 10 5Bulk Ship Calls (est) 695 1,482 431(1) 326 276 523 157 555 318 178 260

TEU Throughput (000) 952.3 1086.0 - 288.0 51.8 108.1 - 401.7 84.9 178.2 39.3NZ Container Volume Rank 2 1 - 4 8 6 - 3 7 5 9Container Ship Calls (est) 594 954 - 362 112 215 - 405 133 208 52

Bulk tonnes/ bulk terminal ha 150,200 89,473 116,854 163,827 48,829 41,916 82,712 48,877 50,300 134,300 72,973TEU / Terminal ha 28,010 14,289 - 16,941 2,130 9,319 - 28,091 8,495 11,880 13,100Bulk Tonnes / General Wharf Metre 2,465 6,243 4,000 2,058 809 1,842 1,334 1,370 877 475 1,811TEU / Container Wharf Metre 982 1,410 - 738 88 288 - 677 179 298 92Bulk Tonnes / Ship 9,293 14,634 9,962 7,669 8,245 2,680 5,268 6,667 4,745 7,545 10,385TEU / Container Ship 1,603 1,138 - 796 462 503 - 992 639 857 756TEU / Container Crane 190,466 135,748 - 48,000 25,875 36,033 - 100,425 28,315 89,100 19,650

Ship Rate 78.3 89.1 - 56.9 50.7 - - 59.5 - 60.7 -Vessel Rate 70.1 69.9 - 42.5 43.5 - - 48.1 - 50.3 -Crane Rate 34.9 36.2 - 23.0 29.7 - - 30.2 - 33.3 32.8

(1) Note number is for vessel arrivals in excess of 100GT, this includes vessels servicing the offshore industry.

51

Comparator tables


New Zealand Port Summary - NZ$ millionFY 2017 AKL TRG NPL NPE WLG NSN MLB LYT TIU POE BLUIncome Statement

Revenue 222.4 255.9 41.7 86.7 63.7 58.4 27.4 114.4 18.8 82.6 36.9 Revenue - Port 214.6 227.2 41.7 86.6 63.7 52.4 17.6 114.4 14.3 67.8 36.9Expenses (119.6) (117.5) (22.7) (49.3) (55.0) (36.7) (14.5) (87.3) (11.5) (55.0) (21.3)Gross Profit 102.7 138.4 19.0 37.4 8.7 21.7 12.9 27.2 7.3 27.6 15.6Associate Earnings (0.1) 14.0 - - 3.2 - - - - 0.1 -One-Offs 5.3 0.2 - - 9.0 - - - 0.2 19.7 0.0EBITDA 107.9 152.6 19.0 37.4 20.9 21.7 12.9 27.2 7.5 47.5 15.6Deprn&Amort (23.9) (24.5) (6.3) (11.1) (5.1) (5.0) (2.8) (13.2) (1.6) (8.7) (3.3)EBIT 84.1 128.1 12.7 26.3 15.8 16.7 10.1 13.9 6.0 38.8 12.3Net Interest Expense (11.6) (16.8) (1.2) (4.0) (5.1) (2.2) (0.3) 5.2 (1.0) (2.7) (0.4)Taxation Expense (12.1) (27.9) (4.3) (5.6) (2.1) (3.7) (2.6) (4.6) (1.4) (4.4) (3.4)Reported Profit 60.3 83.4 7.2 16.7 8.6 10.8 7.2 14.4 3.6 31.7 8.4Other Comprehensive Income 29.6 70.3 0.7 10.9 (10.9) 1 24.2 (1.0) 0.1 1.3 0.9 -Comprehensive Income 89.9 153.7 7.9 27.6 (2.3) 35.0 6.2 14.6 4.9 32.6 8.4Normalised Profit 55.0 83.4 7.2 16.7 8.6 10.8 7.9 14.4 3.5 24.5 8.4

Cashflow Statement summary

Net Operating CF 87.2 98.2 15.9 25.2 7.4 14.6 11.0 29.1 4.7 21.7 12.1

Balance Sheet

Port Fixed Assets 821 1,227 178.0 307.2 118.6 221.2 88.4 336.3 67.9 181.5 46.6Total Assets 1,105 1,423 187.7 329.1 269.9 255.3 171.0 506.1 80.8 533.6 52.6

Net Debt 297 375 38.5 83.3 35.9 46.7 26.7 (134.0) 24.5 67.9 7.9SHF 684 932 137.5 205.1 198.3 175.1 124.6 478.4 51.9 433.6 37.2

Ratios

Share of NZ Sales 22.0% 25.4% 4.1% 8.6% 6.3% 5.8% 2.7% 11.3% 1.9% 8.2% 3.7%Gearing (D/D+E) 30.3% 28.7% 21.9% 28.9% 15.3% 21.1% 17.6% - 32.0% 13.5% 17.6%Gearing ex Revaluations 38.4% 64.9% 32.6% 37.7% 15.9% 44.3% 25.1% - 42.0% 77.2% 17.6%EBIT Margin 37.8% 50.1% 30.4% 30.3% 24.8% 28.6% 37.0% 12.2% 31.6% 47.0% 33.3%ROE 8.0% 9.0% 5.2% 8.1% 4.3% 6.2% 6.4% 3.0% 6.7% 5.6% 22.7%ROA 5.0% 5.9% 3.8% 5.1% 3.2% 4.2% 4.6% 2.9% 4.3% 4.6% 16.1%

(1) Other comprehensive income for WLG includes all earthquake related items

53

Port Summaries

54

Ports of Auckland – AKLOverviewAKL’s key facilities comprise its container and multi-purpose cargo terminals on the Waitemata Harbour (adjacent to Auckland’s CBD), and Freight Hubs at Wiri, Mt Maunganui and Longburn. The port also has ownership of NZX listed Marsden Maritime Holdings, pilotage providers North Tugz, and commercial marine fuel supplier Seafuels. The port is also developing a 33ha Freight Hub in the Waikato. Auckland is the first port of call for a number of international services, receiving full import containers and generating a strong flow of empty containers destined for export.

Port Development• The Port has invested in 27 new automated straddle

carriers and will automate the yard and truck operations at the container terminal. Delivery of the straddles is progressing.

• In final stages of expansion of the container terminal. Construction of 300 metre deep-water berth has been completed and three new cranes ordered.

• Investment in innovation, automation and layout changes will increase port capacity from 900,000 TEU to 1.7 million TEU.

Trade• 6.5m tonnes of break bulk cargo handled in FY17 an

increase of 12.1% on the previous year.• Handled more than 950,000, TEU a 5% increase on

FY16.• Vessel Visits – 1,572 visits from individual vessels.• Vehicles – 297,383 cars unloaded and processed.• More than 596,000 tonnes of cement and 190,000

tonnes of sand.

Financial Performance• Revenue - $222.4m up from $211.1m an increase

of 5.4%.• Operating Expenses - $119.6m an increase of 15.5%.• NPAT – $60.3m, down 28.2% on last year (decrease

was expected as NPAT for FY16 included a $17.6m gain for an asset impairment reversal).

New Zealand ports and freight yearbook 2018 | Port Summaries

Ports of Auckland - AKLIncome Statement 2017 2016Revenue 222.4 211.1 Revenue from Port Operations 214.6 204.9 Operating Expenses (119.6) (103.5) Gross Profit 102.7 107.6 Associate / JV Earnings (0.1) 1.2 One Offs / Other Items 5.3 27.2 EBITDA 107.9 135.9 Depreciation and Amortisation (23.9) (24.5) EBIT 84.1 111.5 Net Interest Expense (11.6) (11.5) Taxation (12.1) (15.9) NPAT 60.3 84.0 Other Comprehensive Income 29.6 67.6 Comprehensive Income 89.9 151.6

Balance Sheet 2017 2016Current Assets 105.0 60.9 Fixed Assets 821.0 752.9 Intangibles 23.9 19.0 Deferred Tax Benefit - - Investments 2.9 6.0 Other Assets 152.2 174.3 Total Assets 1,105.1 1,013.1 Current Liabilities 55.0 47.8 Debt 291.7 246.8 Other Non-Current Liabilities 74.1 76.6 Shareholders' Funds 684.4 642.0 Total Liabilities / SHF 1,105.1 1,013.1

Cash Flow Statement 2017 2016Operating Cash Received 254.4 233.7 Operating Cash Paid (167.2) (155.1) Net Operating Cash Flow 87.2 78.6 Less: Asset Purchases (88.0) (82.4) Less: Dividends Paid (53.7) (42.2) Funding Surplus (Deficit) (54.5) (46.0) Insurance Proceeds - - Proceeds of Asset Sales 15.7 0.1 Dividends from Associates - - Increase in Net Debt 38.7 45.8 Equity Raised - - Funding Provided 54.5 46.0 Source: Annual Report, Deloitte Analysis

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Reported Profit Tax InterestDepreciation Expenses Revenues

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55

Port of Tauranga – TRGOverviewTRG’s key facilities include the Mount Maunganui bulk terminal, Tauranga Container Terminal, MetroPort and its South Auckland inland container port. The Port has a high degree of vertical integration with interests in other ports, stevedoring, and freight transport.

Port Development• Two new ship-to-shore gantry cranes commissioned in

2016. • Capacity of the port has increased to more than 6,500

ground slots.• New purpose built 22,000m2 warehouse near the

container terminal gate opened for Oji Fibre Solutions.• Channel dredged to 13.2m enabling Maersk Antares

11,294 TEU to visit port.• MetroPort volumes up 15.2% to 287,238 TEUs.• Tranship containers up 31% to 245,896 TEUs.

Trade• Trade Volumes – 22.2M tonnes, up 10.3%.• More than 1M TEUs handled in FY2017, up 13.8%.• Export log volumes 5.5m tonnes, up 20.1%.• 4.9% increase in dairy exports.• 1.4m tonnes of imported oil products, up 10.5%.• Dry chemical and bulk liquid imports increased 22.7%

and 6.3% respectively.

Financial Performance• Revenue - $255.9M up 4.2%.• Operating Expenses - $117.5M a 1.5% decrease on

FY16.• EBITDA – $152.4M up 6.4%.• NPAT – $83.4M up 7.9%.


Port of Tauranga - TRGIncome Statement 2017 2016Revenue 255.9 245.5 Revenue from Port Operations 227.2 207.9 Operating Expenses (117.5) (115.8) Gross Profit 138.4 129.7 Associate / JV Earnings 14.0 13.4 One Offs / Other Items 0.2 (0.0) EBITDA 152.4 143.2 Depreciation and Amortisation (24.5) (23.7) EBIT 128.1 119.4 Net Interest Expense (16.8) (16.3) Taxation (27.9) (25.8) NPAT 83.4 77.3 Other Comprehensive Income 70.3 (8.4) Comprehensive Income 153.7 68.9

Balance Sheet 2017 2016Current Assets 49.7 53.2 Fixed Assets 1,227.2 1,127.4 Intangibles 18.0 18.4 Deferred Tax Benefit - - Investments 127.6 123.3 Other Assets 0.0 0.0 Total Assets 1,422.6 1,322.4 Current Liabilities 298.2 232.4 Debt 125.2 130.2 Other Non-Current Liabilities 67.2 74.1 Shareholders' Funds 931.9 885.7 Total Liabilities / SHF 1,422.6 1,322.4

Cash Flow Statement 2017 2016Operating Cash Received 262.6 249.0 Operating Cash Paid (164.4) (160.9) Net Operating Cash Flow 98.2 88.1 Less: Asset Purchases (66.6) (60.7) Less: Dividends Paid (108.9) (72.1) Funding Surplus (Deficit) (77.3) (44.8) Insurance Proceeds - - Proceeds of Asset Sales 0.2 11.0 Dividends from Associates 10.5 8.7 Increase in Net Debt 66.7 25.1 Equity Raised - - Funding Provided 77.3 44.8 Source: Annual Report, Deloitte Analysis

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56

Port Taranaki – NPLOverviewNPL is the only deep water port on New Zealand’s western seaboard and services bulk liquids (serving the region’s oil and gas industry), dry bulk (logs, fertiliser and stock feed) and project cargo.

Port Development• The refurbishment of the tank farm on Centennial

Drive is nearing completion. The work has included a new truck-loading gantry, control system, tank-gauging systems and the replacement of pumps and valves. Once complete the lessee, BP, will be able to ship in and store larger amounts of petrol and diesel for subsequent distribution throughout the region.

• Two additional sets of ShoreTension units have been installed on the Port’s petrochemical wharf. These units enable tankers to remain berthed during disruptive wave events.

• A refurbishment project is underway to ensure the longevity of the Port’s wharves.

Trade• Total Trade Volumes – 5.08m tonnes down 1.4% from

5.15m tonnes in FY16.• Vessel arrivals – 431 vessels (over 100GT), down

17.4% on FY16. • 486,000 JAS logs exported, an increase of 35.9% on

the previous year.

Financial Performance• Revenue – $41.7m down 6.7% on FY16.• Operating Expenses – $22.7m down 9.3% on FY16.• EBITDA - $19.0m down 3.3%.• NPAT - $7.2m down 18.6%.


Port Taranaki - NPLIncome Statement 2017 2016Revenue 41.7 44.7 Revenue from Port Operations 41.7 44.7 Operating Expenses (22.7) (25.0) Gross Profit 19.0 19.6 Associate / JV Earnings - - One Offs / Other Items - - EBITDA 19.0 19.6 Depreciation and Amortisation (6.3) (6.0) EBIT 12.7 13.6 Net Interest Expense (1.2) (1.3) Taxation (4.3) (3.4) NPAT 7.2 8.9 Other Comprehensive Income 0.7 7.4 Comprehensive Income 7.9 16.2

Balance Sheet 2017 2016Current Assets 9.0 10.8 Fixed Assets 178.0 167.6 Intangibles 0.7 0.7 Deferred Tax Benefit - 0.9 Investments - - Other Assets - - Total Assets 187.7 180.0 Current Liabilities 5.9 7.6 Debt 41.8 35.2 Other Non-Current Liabilities 2.4 2.8 Shareholders' Funds 137.5 134.5 Total Liabilities / SHF 187.7 180.0


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57

Napier Port – NPEOverviewNPE is New Zealand’s fourth largest container terminal by total TEUs. The port’s productive hinterland and outreach initiatives drive its throughput with key trades including agricultural produce and forestry.

Port Development• Napier Port is seeking resource consent for a $125m

350 metre long wharf.• The port is also seeking consent to dredge the

shipping channel to a depth of 14.5 metres to enable larger ships to visit.

• Several port areas were repurposed for increased log volumes and lumber packing operations.

• A joint venture between Napier Port, Halls Group and Ports of Auckland saw the expansion of the covered onsite storage at the Longburn Intermodal Freight Hub near Palmerston North.

Trade• 688 vessels called at the port in 2017, a 6.9%

increase on 2016.• 288,444 TEU handled, a 12% increase on the previous

year.• Total cargo of 4.754 million tonnes handled by the

port.• 54 Cruise ship visits and more than 125,000

passengers.• Record log volumes of 1.63 million tonnes.

Financial Performance• Revenue - $86.7m up 19.3% from FY16.• Operating Expenses - $49.3m up from $42.2m in

FY16.• EBITDA - $37.4m a 23% increase on FY16.• NPAT - $16.7m a 46% increase from FY16.


Napier PortIncome Statement 2017 2016Revenue 86.7 72.7 Revenue from Port Operations 86.6 72.6 Operating Expenses (49.3) (42.2) Gross Profit 37.4 30.4 Associate / JV Earnings - - One Offs / Other Items - - EBITDA 37.4 30.4 Depreciation and Amortisation (11.1) (10.3) EBIT 26.3 20.2 Net Interest Expense (4.0) (4.2) Taxation (5.6) (4.5) NPAT 16.7 11.5 Other Comprehensive Income 10.9 (2.3) Comprehensive Income 27.6 9.2

Balance Sheet 2017 2016Current Assets 12.1 8.4 Fixed Assets 307.2 288.1 Intangibles 1.7 1.9 Deferred Tax Benefit - - Investments 7.3 2.9 Other Assets 0.8 1.3 Total Assets 329.1 302.6

- - Current Liabilities 14.8 9.6 Debt 83.6 79.7 Other Non-Current Liabilities 25.6 25.0 Shareholders' Funds 205.1 188.2 Total Liabilities / SHF 329.1 302.6

Cash Flow Statement 2017 2016Operating Cash Received 83.0 73.4 Operating Cash Paid (57.8) (50.3) Net Operating Cash Flow 25.2 23.1 Less: Asset Purchases (18.7) (10.5) Less: Dividends Paid (10.7) (7.9) Funding Surplus (Deficit) (4.2) 4.8 Insurance Proceeds - - Proceeds of Asset Sales 0.1 0.2 Dividends from Associates - - Increase in Net Debt 4.1 (5.0) Equity Raised - - Funding Provided 4.2 (4.8) Source: Annual Report, Deloitte Analysis

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58

Centreport – WLGOverviewWellington services a diversified cargo base spanning containers, bulk trades (oil, logs), cruise and interisland ferries.

Port Development• The 14 November 2016 Kaikoura earthquake caused

differential settlement, liquefaction and significant building and wharf damage.

• CentrePort is now focussed on regeneration of the Port including ensuring resilience is built into the business.

• A $28m temporary works programme was initiated in the aftermath of the quake to allow the resumption of container operations including ship-to-shore crane operations. This has returned port capacity to pre-quake levels.

• The temporary works required the driving of over 185 piles to a depth of 40 metres, over a thousand tonnes of steel and approximately 644 gravel columns.

• A number of the Port’s investment properties were damaged in the earthquake. Shed 39 and Customhouse are on track to be fully reoccupied. Statistics House has been demolished while Shed 35 was removed shortly after the earthquake.

Trade• Log Volumes – 1.1m tonnes, a 5% increase on FY16.• Cruise Ships – 12% increase in cruise ship visits.• Vehicles – 32% increase in vehicle volumes.• Fuel - More than 1m tonnes of petroleum through the

port, an increase 7% on FY16.• More than $22 billion in cargo value was moved

through the port in FY17.

Financial Performance• Revenue – $63.7m down from $76.2m in FY16.• Operating Expenses - $55.0m up 2% from $53.9m in

FY16.• EBITDA – $83.2m an increase of 224% on FY16 • NPAT - $51.7m up from $11.6m in FY16.


Centreport - WLGIncome Statement 2017 2016Revenue 63.7 76.2 Revenue from Port Operations 63.7 76.2 Operating Expenses (55.0) (53.9) Gross Profit 8.7 22.3 Associate / JV Earnings (18.6) 7.0 One Offs / Other Items 10.3 (3.6) Earthquake Related Items 82.8 - EBITDA 83.2 25.7 Depreciation and Amortisation (5.1) (7.0) EBIT 78.1 18.8 Net Interest Expense (9.4) (6.8) Taxation (17.0) (0.4) NPAT 51.7 11.6 Other Comprehensive Income (54.0) - Comprehensive Income (2.3) 11.6

Balance Sheet 2017 2016Current Assets 71.9 18.3 Fixed Assets 118.6 185.5 Intangibles 3.3 3.0 Deferred Tax Benefit - 0.0 Investments 76.2 127.1 Other Assets - - Total Assets 269.9 334.0 Current Liabilities 9.2 10.7 Debt 36.0 102.0 Other Non-Current Liabilities 26.4 20.0 Shareholders' Funds 198.3 201.3 Total Liabilities / SHF 269.9 334.0

Cash Flow Statement 2017 2016Operating Cash Received 94.2 81.3 Operating Cash Paid (86.9) (62.6) Net Operating Cash Flow 7.4 18.7 Less: Earthquake Costs (2.4) - Less: Asset Purchases (20.8) (12.3) Less: Dividends Paid (0.7) (6.8) Funding Surplus (Deficit) (16.5) (0.4) Insurance Proceeds 75.1 - Proceeds of Asset Sales 6.7 - Dividends from Associates - - Increase in Net Debt - - Equity Raised (65.2) 0.4 Funding Provided 16.5 0.4 Source: Annual Report, Deloitte Analysis

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59

Port Nelson – NSNOverviewNSN occupies a sheltered corner of New Zealand, secured by a productive hinterland, topographical isolation and the absence of a rail link. It owns a portfolio of properties within the Port area, with ongoing demand for industrial development. The Port is heavily focussed on export of the regions primary production, with key trades being wine, fish, fruit and forestry. Reflecting limited import demand, most import containers are empty. While its key trades are international export, Nelson records a high level of transhipments.

Port Development• A significant amount of recent port capital work has

focussed on earthquake prone buildings in order to enhance the quality of port infrastructure.

• Redevelopment of former Rattrays site was completed providing additional space for timber cargo.

• The 13,000m2 Patterson Logistics Centre was opened in February 2017.

• The Port opened its Carkeek Street workshop facility in March 2017. This will enable staff to service large container handling machines under cover in facilities nearer the Port’s core operational area.

• Port administration offices were relocated to a recently refurbished building on Vickerman Street.

• Two cargo sheds were demolished to provide additional operational space.

• Demolition commenced on the old boiler plant and old workshop buildings. This work will increase space for logs.

Trade• Cargo Volumes: 3.1m tonnes, an increase of 14.8%.• Container TEUs 108,106, an increase of 12%.

Financial Performance• Revenues - $58.4m, an increase of 28%.• Expenses - $36.7m, an increase of 31.5%.• EBITDA - $21.7m, an increase of 45.6%.• NPAT - $10.8m, an increase of 103.8% (Calwell Basin

dredging and stabilisation expenses of $2.7m were incurred in FY16).


Port Nelson - NSNIncome Statement 2017 2016Revenue 58.4 45.5 Revenue from Port Operations 52.4 40.3 Operating Expenses (36.7) (27.9) Gross Profit 21.7 17.6 Associate / JV Earnings - - One Offs / Other Items 0.0 (2.7) EBITDA 21.7 14.9 Depreciation and Amortisation 5.0 5.3 EBIT 16.7 9.6 Net Interest Expense 2.2 1.6 Taxation 3.7 2.7 NPAT 10.8 5.3 Other Comprehensive Income 24.2 (1.6) Comprehensive Income 35.0 3.6

Balance Sheet 2017 2016Current Assets 13.3 11.4 Fixed Assets 221.2 171.7 Intangibles 0.2 0.3 Deferred Tax Benefit - - Investments 20.5 16.6 Other Assets 0.1 0.6 Total Assets 255.3 200.6 Current Liabilities 19.8 15.7 Debt 47.2 29.5 Other Non-Current Liabilities 13.3 8.8 Shareholders' Funds 175.1 146.6 Total Liabilities / SHF 255.3 200.6

Cash Flow Statement 2017 2016Operating Cash Received 56.0 44.5 Operating Cash Paid 41.4 32.5 Net Operating Cash Flow 14.6 12.0 Less: Asset Purchases 27.3 15.3 Less: Dividends Paid 4.8 4.7 Funding Surplus (Deficit) (17.5) (8.0) Insurance Proceeds - - Proceeds of Asset Sales 0.0 0.0 Dividends from Associates - - Increase in Net Debt 17.5 8.0 Equity Raised - - Funding Provided 17.5 8.0 Source: Annual Reports, Deloitte Analysis

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60

Port Marlborough – MLBOverviewMLB remains New Zealand’s most diverse port company, spanning property, interisland ferries, general wharves, a deep water bulk terminal, marinas and aquaculture. Notably, MLB does not have a container terminal. The port’s primary trade is log exports.

Port Development• Expansion of the Waimahara berth in preparation of

the maiden visit to Picton by Ovation of the Seas. • Berth expansion included increasing mooring bollard

capacity from 100 tonnes to 300 tonnes.• Horizontal dimensions of the berth were dredged to

meet the length and beam requirements of Quantum and Oasis class cruise vessels.

• There were 39 cruise ship visits during 2016-2017 carrying a total of 73,048 visitors. Visitor numbers are expected to increase almost 50% to 113,000 as a result of the Waimahara berth expansion.

Trade• Record log export volume of 686,999 JAS, up 4.1% on

last year.• Cement Volumes: 18,346 tonnes from 9,763 in 2016,

an increase of 89%. The increase is largely attributable to Golden Bay Cement’s investment in a new larger vessel.

• Fish Volumes: 15,594 tonnes up from 10,357 tonnes, a 51% increase.

• Total non-ferry cargo totalled 827,124 tonnes, a 5.1% increase on 2016.

Financial Performance• Revenues – Port installations and services: $16.84m,

up 5.5%.• Revenues – Investment properties: $9.7m, up 7.3%.• Operating expenses: $14.5m, down 12.3%.• Net Profit After Tax: $7.2m, an increase of 298% on

2016.


Marlborough - MLBIncome Statement 2017 2016Revenue 27.4 25.8 Revenue from Port Operations 17.6 16.7 Operating Expenses (14.5) (16.5) Gross Profit 12.9 9.4 Associate / JV Earnings - - One Offs / Other Items - (1.0) EBITDA 12.9 8.4 Depreciation and Amortisation (2.8) (2.4) EBIT 10.1 6.0 Net Interest Expense (0.3) (3.3) Taxation (2.6) (0.8) NPAT 7.2 1.8 Other Comprehensive Income (1.0) 19.7 Comprehensive Income 6.2 21.5

Balance Sheet 2017 2016Current Assets 4.8 3.2 Fixed Assets 88.4 91.5 Intangibles 0.6 0.7 Deferred Tax Benefit - - Investments 77.2 75.0 Other Assets - - Total Assets 171.0 170.5

- - Current Liabilities 2.6 2.4 Debt 29.5 31.5 Other Non-Current Liabilities 14.3 15.6 Shareholders' Funds 124.6 120.9 Total Liabilities / SHF 171.0 170.5

Cash Flow Statement 2017 2016Operating Cash Received 28.0 25.7

Operating Cash Paid (17.0) (18.8)

Net Operating Cash Flow 11.0 6.9 Less: Asset Purchases (4.0) (6.0)

Less: Dividends Paid (2.5) (2.1)

Funding Surplus (Deficit) 4.5 (1.2) Insurance Proceeds - -

Proceeds of Asset Sales 0.0 0.0

Dividends from Associates - -

Increase in Net Debt (4.5) 1.2

Equity Raised - -

Funding Provided (4.5) 1.2 Source: Annual Report, Deloitte Analysis

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61

Lyttelton Port of Christchurch – LYTOverviewLYT is positioned as the South Island gateway port, facilitating bulk trades, vehicle imports, and containerised trade. Key facilities included the CashinQuay container terminal, specialist liquid, bulk and vehicle terminals and a coal export facility. Both CityDepot and Midland port offer off-port warehousing and container park services.

Port Development• Redevelopment programme moving port operations

onto reclaimed land in Te Awaparahi Bay. The reclamation will triple land space for growing container volumes.

• The port has been granted resource consents to undertake dredging works in order to increase the length of the existing channel by 6.5km, widen it by 20 metres and increase its depth by 5-6 metres. This work will enable larger ships to visit the port.

Trade• Crane Rate 30.8 containers per hour per crane.• Ship Rate 60.5 TEU per hour per ship.• Coal load out rate 25,640 tonnes per day.• More than 400,000 TEU handled during FY17.

Financial Performance• Revenue - $114.4m, an increase of 8.2% on FY16.• Operating Expenses – $87.3m, up 6.1% on FY16.• EBITDA - $27.2m.• NPAT - $14.4m, up from a loss of $59.8m in FY16.


Lyttelton Port of Christchurch - LYTIncome Statement 2017 2016Revenue 114.4 105.7 Revenue from Port Operations 114.4 105.7 Operating Expenses (87.3) (82.3) Gross Profit 27.2 23.4 Associate / JV Earnings - - One Offs / Other Items - (99.5) EBITDA 27.2 (76.1) Depreciation and Amortisation (13.2) (14.4) EBIT 13.9 (90.5) Net Interest Expense 5.2 8.2 Taxation (4.6) 22.4 NPAT 14.4 (59.8) Other Comprehensive Income 0.1 (0.2) Comprehensive Income 14.6 (60.0)

Balance Sheet 2017 2016Current Assets 157.7 191.1 Fixed Assets 336.3 296.5 Intangibles 10.5 7.7 Prepayments 0.5 0.8 Investments - - Other Assets 1.0 (4.7) Total Assets 506.1 491.5 Current Liabilities 27.4 21.6 Debt - - Other Non-Current Liabilities 0.3 0.8 Shareholders' Funds 478.4 469.1 Total Liabilities / SHF 506.1 491.5


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PrimePort Timaru – TIUOverviewTIU is owned 50:50 by Timaru District Holdings Limited (TDHL) and Port of Tauranga Limited (POTL). POTL acquired its stake for $21.6m in 2013 to implement a hub and spoke model. The sale included a 35 year lease of the container terminal to Timaru Container Terminal Limited (TCTL). The Port services a range of regional primary industries including meat, fish and forestry exports, as well as imports of fertiliser, stock feed, petroleum and cement.

Port Development• Installed a new, more powerful LED lead light at the

Harbour entrance. The first of its kind in New Zealand.• Capital upgrade of four bulk product hoppers was

initiated during the year. Upgrades improve safety, capacity and working life.

• Additional operating land freed up by the removal of an 80 tonne bitumen tank.

Trade• Cargo Volume – 1.5m tonnes up 13% from the

previous year.• Ship Visits – 451 visits, a 9.7% increase.• Bulk Trade – Increase in logs, cement and fuel

volumes.

Financial Performance• Revenue – $18.8m, an increase of 13.6% on the

previous year.• Operating Expenses – $11.5m, an increase of 12.7%.• EBITDA - $7.5m, an increase of 15.4%.• NPAT - $3.6m, up 2%.


PrimePort - TIUIncome Statement 2017 2016Revenue 18.8 16.6 Revenue from Port Operations 14.3 13.6 Operating Expenses (11.5) (10.2) Gross Profit 7.3 6.4 Associate / JV Earnings - - One Offs / Other Items 0.2 0.2 EBITDA 7.5 6.5 Depreciation and Amortisation (1.6) (1.2) EBIT 6.0 5.3 Net Interest Expense (1.0) (0.5) Taxation (1.4) (1.3) NPAT 3.6 3.5 Other Comprehensive Income 1.3 0.6 Comprehensive Income 4.9 4.1

Balance Sheet 2017 2016Current Assets 5.7 4.0 Fixed Assets 67.9 67.1 Intangibles - - Deferred Tax Benefit 0.5 0.8 Investments 3.8 3.7 Other Assets 2.9 2.0 Total Assets 80.8 77.5 Current Liabilities 1.9 2.0 Debt 27.0 27.0 Other Non-Current Liabilities - 0.2 Shareholders' Funds 51.9 48.3 Total Liabilities / SHF 80.8 77.5

Cash Flow Statement 2017 2016Operating Cash Received 18.4 17.3 Operating Cash Paid 13.7 12.2 Net Operating Cash Flow 4.7 5.1 Less: Asset Purchases 2.2 23.3 Less: Dividends Paid 1.4 1.3 Funding Surplus (Deficit) 1.2 (19.6) Insurance Proceeds - - Proceeds of Asset Sales 0.0 0.0 Dividends from Associates - - Increase in Net Debt (1.2) 19.5 Equity Raised - - Funding Provided (1.2) 19.6 Source: Annual Report, Deloitte Analysis

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Port Otago – POEOverviewPOE operates two port areas, with Port Chalmers handling containers and bulk (largely forestry) cargoes, while the Upper Harbour Dunedin wharves handle lower draft vessels. The port’s catchment provides it with primary products for export from much of Otago and Southland, particularly dairy from Fonterra’s Endendaleplant. POE has also built a significant $330m industrial property portfolio spanning Auckland, Hamilton and Dunedin.

Port Development• 25 year maintenance dredging disposal resource

consent obtained.• Dredging work continued to deepen the shipping

channel to Port Chalmers to 14 metres chart datum.• HEB Construction appointed to construct a 135 metre,

$21m wharf extension at Port Chalmers.

Trade• Container throughput - 178,200 TEU, 3% higher than

FY16.• Conventional cargo volumes - 1.5m tonnes, up 14%.• Log Exports – 957,000 tonnes, an increase of 18% on

FY16.

Financial performance• Revenue: $89.6m, an increase of 10.6% on the

previous year.• Operating Expenses: $55.0m, a 10.2% increase on

FY16.• NPAT: $38.7m, up 13.5% on FY16.


Port Otago - POEIncome Statement 2017 2016Revenue 89.6 81.0 Revenue from Port Operations 67.8 63.9 Operating Expenses (55.0) (49.9) Gross Profit 34.7 31.1 Associate / JV Earnings 0.1 0.3 One Offs / Other Items 19.7 19.7 EBITDA 54.5 51.1 Depreciation and Amortisation (8.7) (8.1) EBIT 45.8 43.0 Net Interest Expense (2.7) (2.2) Taxation (4.4) (6.7) NPAT 38.7 34.1 Other Comprehensive Income 0.9 (0.3) Comprehensive Income 39.6 33.8

Balance Sheet 2017 2016Current Assets 42.6 37.6 Fixed Assets 181.5 179.2 Intangibles 5.4 5.4 Deferred Tax Benefit - - Investments 302.4 273.3 Other Assets 1.7 1.5 Total Assets 533.6 497.1 Current Liabilities 14.9 13.0 Debt 68.4 62.4 Other Non-Current Liabilities 16.7 20.0 Shareholders' Funds 433.6 401.7 Total Liabilities / SHF 533.6 497.1

Cash Flow Statement 2017 2016Operating Cash Received 88.7 77.5

Operating Cash Paid 67.0 59.3

Net Operating Cash Flow 21.7 18.2 Less: Asset Purchases 21.1 40.2

Less: Dividends Paid 7.8 7.3

Funding Surplus (Deficit) (7.2) (29.3) Insurance Proceeds - -

Proceeds of Asset Sales 0.6 2.0

Dividends from Associates - -

Increase in Net Debt 6.6 27.4

Equity Raised - -

Funding Provided 7.2 29.3 Source: Annual Report, Deloitte Analysis

- 20,000 40,000 60,000 80,000

100,000 120,000 140,000

Income Statement - POE (000)


Source: Annual Report

- 100,000 200,000 300,000 400,000 500,000 600,000

Balance Sheet - POE (000)



64

Southport – BLUOverviewBLU is New Zealand’s southernmost commercial port. Operating from a 40ha man-made island in Bluff Harbour serving a productive hinterland yielding forestry, fish and meat exports. BLU services imports of oil, fertiliser and stock feed, as well as NZAS’s aluminium smelter (imports of alumina and exports of aluminium). BLU is listed on the NZX and is majority owned by the Southland Regional Council.

Port Development• Introduction of an asset management plan to map out

a maintenance programme for port assets. Total R&M spend of $2.11m with a further $2.09m budgeted for FY18.

• Intermodal Freight Centre commenced operations in FY17 and provides a range of services to freight forwarders, transport operators, importers and exporters.

Trade• Log volumes 560,000 tonnes and increase of 18% on

FY16 and a new record.• Forestry now represents almost 30% of the business

throughput.

Financial Performance• Revenue – Port and Warehousing $36.9m, up 1% on

FY16.• Operating Expenses – $21.3m, up 3.2% on FY16.• Net Profit after Tax - $8.4m, down 3%.


Southport - BLUIncome Statement 2017 2016Revenue 36.9 36.7 Revenue from Port Operations 36.9 36.7 Operating Expenses (21.3) (20.6) Gross Profit 15.6 16.1 Associate / JV Earnings - - One Offs / Other Items 0.0 0.2 EBITDA 15.6 15.9 Depreciation and Amortisation (3.3) (3.0) EBIT 12.3 12.9 Net Interest Expense (0.4) (0.7) Taxation (3.4) (3.4) NPAT 8.4 8.7 Other Comprehensive Income - - Comprehensive Income 8.4 8.7

Balance Sheet 2017 2016Current Assets 6.0 5.7 Fixed Assets 46.6 47.4 Intangibles - - Deferred Tax Benefit - - Investments - - Other Assets - - Total Assets 52.6 53.0 Current Liabilities 5.0 5.9 Debt 9.6 10.7 Other Non-Current Liabilities 0.8 0.8 Shareholders' Funds 37.2 35.6 Total Liabilities / SHF 52.6 53.0

Cash Flow Statement 2017 2016Operating Cash Received 37.6 36.4 Operating Cash Paid (25.5) (24.5) Net Operating Cash Flow 12.1 11.9 Less: Asset Purchases (3.4) (9.4) Less: Dividends Paid (6.8) (6.4) Funding Surplus (Deficit) 1.9 (4.0) Insurance Proceeds - - Proceeds of Asset Sales 0.0 0.2 Dividends from Associates - - Increase in Net Debt (1.9) 3.7 Equity Raised - - Funding Provided (1.9) 4.0 Source: Annual Report, Deloitte Analysis

-

20,000

40,000

60,000

80,000Income Statement - BLU (000)



- 10,000 20,000 30,000 40,000 50,000 60,000

Balance Sheet - BLU (000)



65

Marsden Maritime Holdings – MMH

Overview

MMH (formerly Northland Port Corporation) is an NZX-listed company, with its largest investment being a 50% stake in Northport (NTH) (with TRG also holding 50%). MMH’s portfolio interests currently include a 50% interest in NTH, 50% interest in North Tugz, 180ha of industrial zoned land, and the Marsden Cove Marina.

Port Development

During the 2017 financial year Marsden Maritime Holdings provided a laydown area of 1.5ha to Culham Engineering to receive steel imports via Northport destined for a number of construction projects in Auckland.


Northport has a vision grow its linear berth to 1,390 metres more than twice its current length and grow its overall footprint to 75ha from 48ha at present.

Trade

Cargo Volumes: 3.6m tonnes up 7.3% on FY16.

Log exports: 2.8m tonnes a 5.1% increase from FY16.

Financial Performance

Consolidated revenue: $13.4m up from $11.9m in FY16.

Consolidated NPAT: $10.1m down from $12.1m in FY16.

Eastland Port – EST

Overview

Eastland Group is wholly owned by Eastland Community Trust (ECT) and has interests in key infrastructure of the Tairāwhiti region. These comprise Eastland Logistics (Eastland Port and Eastland Airport), Eastland Electricity (lines network), Eastland Generation and Eastland Investment Properties. EST is located at the mouth of the TaruheruRiver in the city of Gisborne. EST is solely an export port.

Port Development

The port has completed design work for the refurbishment of the slipway. This is the initial step in a twin log berth project that will ultimately enable two logging ships to berth at the same time.

The port also saw the arrival of the purpose built pilot boat Rere Moana. This replaces an older boat and provides greater safety and comfort for the pilot transfer operation.

Consent for the redevelopment of the wharfside log yard was granted during the year.

Trade

Moved a total of 2.5m tonnes of product across its wharves up 8.5% on last year.

136 ship visits during the 2017 financial year of which 126 were logging ships.

Financial Performance

Not available for port performance only.

66

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